Flex Foods - Can Success Be Achieved, The Natural Way?

Flex Foods Limited, part of Uflex Group of companies, started its operations in 1992 as an Export Oriented Unit, located in Dehradun-Uttarakhand (foothills of Himalaya) engaged in Freeze Drying, Air Drying, Individually Quick Frozen(IQF) and Canning of white button mushrooms, fruits & vegetables, culinary herbs and green pepper corns catering to European, US, Canadian, Australian and Domestic market.. The company has its own captive state of art mushroom growing facility with fully equipped mushroom spawn and compost preparation facilities.
The company started its commercial operations in 1992 by establishing an 100% EOU for vacuum freeze dried vegetables mainly mushroom and culinary herbs with a total processing capacity of 2000 MTs per annum.

List of countries where company export:
-USA
-North America
-Canada
-Europe (U K, Germany, Denmark, France, Belgium)
-Australia
-South Africa
-Middle East countries

Flex Foods offers a wide range of Vacuum Freeze Dried, Air-Dried, Frozen and IQF (Individually Quick Frozen) product range of mushrooms, herbs, spices and fruits/vegetables, meeting strict quality & hygiene standards. Canned button mushroom in various shapes and sizes is also available as per the customer requirement. Flex Foods Limited is a single point source of supplier of Frozen / IQF (Individually Quick Frozen), Air Dried, Canned as well as Freeze Dried products to the customers as per their requirements. A tempting food i.e. retail packs of Culinary Herbs for Indian customers are also available in four varieties in Flex Foods.

New Products:

• Air Dried & IOF – Stevia

• Air Dried – Sugar Beat

• Freeze Dried – Jalepeno Pepper – Red

• Freeze Dried – Jalepeno Pepper – Green

• Freeze Dried – Banana

• Freeze Dried – Green Capsicum10

Further, stevia & sugar beat has been cultivated and samples in Air Dried & IOF form have been sent to overseas buyers for their approvals. Customers have asked for improvement in the texture of the product, which will be developed soon. 

Major Risk:

• Increase in the prices of raw materials, packing material and fuel

• Food inflation in general

• Non-availability of raw materials

• Exchange rate fluctuations

• Changes in fiscal benefits/laws

• Competitive environment with diverse players.

To address these risks, the Company has a single point source supplier of Frozen/IQF, Air Dried as well as Freeze Dried products to the customers as per their requirements with high quality mushrooms and herbs. Though the competition is fierce, the goodwill and the quality of the products offered by the Company are great plus factors and the Company expects to overcome the competition. The Company had expanded its freeze drying capacity by adding print of art freeze dried cabinets.

My Views:

The company remained under my watchlist for long time, since I was busy understanding the scalability of business. But the product portfolio of the company looks good, plus their R&D, which has been continuously coming up with new products, will form its heavy usage, with increasing awareness among people regarding such health oriented products.

Investing in such a company, especially in food sector, is about your belief in the products that company has in its portfolio. If one asks me, I would say, the sale of some of the new products like Stevia, and some culinary herbs, is bound to increase with time. Major advantage I feel, in these products is that, the regular users of these products don't suddenly quit using it. Plus, awareness among people could bring about the increase in sale of these products further. 

The company has been paying very good dividend since long time, which increases my confidence in management, especially, when there has been concerns raised over its management.

The company is growing at a CAGR of 12% in terms of sales, and 22% in terms of net profit in last 5 years. For next few years, it might continue to similar, or slightly better growth, but with time, they will start posting very good numbers, after penetration of their new products in Indian markets.

For Q1 this year, the company posted sales growth of 19%, and net profit growth of approx 100%, which lays down the path for good growth, this year.

Even considering FY'14 earnings, the company is trading at a modest P/E of 7. This year, I am expecting the company to post EPS around 12, which will make the stock look dirty cheap at current market price.