Motilal Oswal Recommends Buying LT Foods, Sets Price Target at Rs 500

LT Foods at a Strategic Inflection Point: Unlocking Growth Opportunities

LT Foods (LTFOODS) is poised at a critical juncture, where a combination of external catalysts and internal financial discipline converges to reinforce the investment thesis. The company's US business, which accounts for approximately 46% of its revenue, has successfully passed on the majority of the 50% US tariff burden to customers, highlighting the brand stickiness of Daawat and Royal in its most significant market.

This strategic advantage becomes even more pronounced with the introduction of the new 10% US tariff rate, which is expected to unlock volume upside, margin recapture, and competitive parity against Pakistani basmati. This shift from a six-month earnings headwind to a durable structural tailwind presents a significant opportunity for LTFOODS to drive growth.

However, the company is also navigating a near-term input cost challenge. Basmati paddy prices rose approximately 12% in crop 2025, driven by flood-induced yield shortfalls across Punjab's basmati belt. This translates into an 830–940 basis point gross margin headwind in isolation. Nevertheless, LTFOODS' aged inventory model, premium export realizations of INR144/kg, and improving working capital discipline collectively contain the actual earnings impact, demonstrating the company's ability to absorb cyclical cost pressures without structural margin contraction.

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Revenue and Earnings Growth Projections

We expect LTFOODS to report a compound annual growth rate (CAGR) of:

Valuation and Recommendation

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We value LTFOODS at 17x FY28E EPS, arriving at a target price of INR500. Given the company's strategic position and growth prospects, we reiterate a BUY recommendation.