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Plant visit takeaways - Baked to perfection!

In our recent visit to Mrs. Bectors Food Specialities' (MBFSL) Khopoli plant (Breads and Buns facility), we got interesting insights into their manufacturing process and reasons that make MBFSL the sole supplier to leading QSR players in India. The company uses state-ofthe-art machinery with the process approved by leading QSR players. The company has indicated that demand for QSR and breads & buns has been better than pre-covid levels with production up almost 2x since then. We continue to hold a positive view on the stock with a fair value of Rs550.

 High level of automation with exceptional quality checks: Mrs. Bectors Food is the largest supplier of QSR buns in India with some relations lasting for almost two decades now given the highest quality standards followed by them. Most of the company's processes are highly automated, with some of the best advanced technologies sourced from leading players across the globe. The manual parts of the process are kept to a minimum, which includes putting flour into the sieve and placing dough in the proofing machine.

 Bread division gearing up for growth: The company manufactures close to 11mn packs of bread at the Khopoli plant with the focus on markets of Mumbai and Pune regions. Currently, the company’s products are available in the suburbs of Mumbai and across all major e-commerce websites. The company expects to ramp up production and improve distribution going ahead. Given the strong demand and positive feedback, the company is looking to set up an extra oven for bread, which is likely to increase the capacity to 60,000 units from 40,000 units.

 Raw material sourcing: The major raw material for MBFSL includes flour, water, yeast, and preservatives and it generally has 2-3 vendors for each of the raw materials to negotiate for better pricing. For the institutional buns, the company mainly sources from millers who have the proper technological know-how to provide a particular type of flour.

Valuation and rating:

MBFSL is an upcoming player in biscuits in North India along with being one of the largest biscuits exporters from India; it is also one of the largest suppliers of buns to QSR chains in India. Its bakery brand, English Oven, is one of the fastest growing brands within the large scale premium bakery space.

We believe the company is on the track to capture a larger share of the huge market due to initiatives like (a) rapidly increasing distribution and continuous innovation in domestic biscuits, (b) capturing a greater biscuit export client share, (c) increasing market reach in branded breads, and (d) enhancing product portfolio and deepening relationships with leading QSR players.

Given the management's clear focus we expect these strategies to play out effectively. We estimate MBFSL to post revenue growth of 13% CAGR over FY21-24E, while we expect earnings to improve by 15% over the same period. We roll over our TP base to Sept’23 earnings of ~Rs16 post which we arrive at a fair value of Rs550.

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