ADF Foods Jumps 18% in a single trading session

In the past few trading sessions, the Nifty index is being dominated by the bulls, reaching new all-time highs and currently trading above the 19,300 level. The Nifty FMCG sector has also participated in this rally, with a gain of over 2.7% from the last two trading sessions, achieving a new all-time high. Amidst this bullish trend, one stock from the same sector has captured the attention of investors, surging more than 18% in today’s trading session alone.

 The stock in focus is ADF Foods Ltd, a holding company engaged in the manufacturing and sale of processed food products such as pickles, chutneys, ready-to-eat items, pastes and sauces, frozen foods, and spices. It operates through two segments: Process and Preserved Food, and Agency Distribution Business. The company’s brands include Ashoka, Soul, Nate’s, PJ Organics, Aeroplane, Truly Indian, Khansaama, and Camel. 

Established in 1932, the company is headquartered in Mumbai, India.

ADF Foods Ltd has demonstrated impressive financial performance over the past five years, achieving a sales growth of 18% CAGR, a return on equity of 18% CAGR, and a robust profit growth of 25% CAGR. Furthermore, the company has significantly reduced its debt, making it nearly debt-free.

From a technical standpoint, the stock has been retracing its previous rally that began on March 24, 2020, starting from the level of Rs 123.05 and peaking at Rs 1094.70 on May 19, 2021. 

After this substantial rally, the stock began retracing, experiencing a decline of around 50% through lower highs and lower lows within the range of Rs 1094.70 and Rs 650. During this trading action, swing highs were formed at Rs 1000 and Rs 958.30 on October 18, 2021, and December 13, 2022, respectively. By drawing a trendline from the high of June 17, 2021 (Rs 1018 level) along with these swing highs, we can observe a breakout trendline of the bullish up flag pattern on the daily chart. 

Interestingly, the stock has been consolidating within a narrow range just above this trendline, and today it breached this consolidation range with a rally of over 18%, confirming the breakout of the discussed price pattern.

Considering the breakout level of Rs 940, the minimum potential target for this breakout stands around Rs 1400, representing a gain of approximately 25% from the current market price of Rs 1120.