Monsoon woes: Farm products scrips on a roll

Share prices of companies engaged in the agricultural products business are on a with many of them rising up to 50 per cent during the week due to shortfall of rain, which will lead to rise in prices of commodities if there is less agricultural production.

Stocks from the food processing sector and of companies trading in rice, dairy products, edible oils and food items outperformed markets by gaining 10-50 per cent as compared with the 2 per cent rise in Sensex. Most mid-cap and small-cap companies such as ADF Foods, Kohinoor Foods, LT Foods and Chamanlal Setia Exports are currently trading near their 52-week highs.

The counters dealing in agricultural products saw more buying. The combined trading volume of these stocks more than doubled with 36.27 million equity shares changing hands on BSE and NSE as compared with 15.27 million in the previous week.

ADF Foods, which rose 51 per cent to Rs 57.70 (Rs 38.10) during the week, saw trading volumes of 1.59 million on BSE as compared with an average of 70,000 in the previous week. The company's four promoters have sold a total of one million equity shares of the company to Top Class Education Facilities Services at a price of Rs 40 per share via bulk deals on BSE.

Many of these stocks gaining more than 100 per cent from their 52-week lows are currently available at an average price to earnings (P/E) multiple of eight times. They had traded at a P/E multiple of 13 times at their peak.

Kohinoor Foods offers an extensive range of food products that cater to all kinds of consumers in different parts of the world - from basmati rice, ready-to-eat products to frozen food. Its stock has risen 34 per cent to Rs 64.50 (Rs 48.05) during the week. The company posted 75 per cent jump in net profit to Rs 4.16 crore (Rs 2.38 crore) during the quarter ended June 2009.

LT Foods has seen a 30 per cent gain in its market price to Rs 57.05 as against Rs 43.90 on August 7, 2009. The company, which owns the 'Daawat' rice brand, had reported 59 per cent growth in net profit to Rs 12.02 crore (Rs 7.54 crore).