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New capacity and innovation, key drivers

Improving demand outlook

Mrs Bectors Food Specialities’ (BECTORS IN) Q4 sales rose 17.4% YoY to INR 4.1bn (in-line). This growth was driven by an 18% YoY increase in both the biscuits and bakery segments, with overall volume growth in mid-teens for Q4. In the biscuits segment, export growth was strong, while the domestic business was subdued. Growth in domestic biscuits slowed in H2 (post-Diwali) compared with H1FY24 due to heightened competition from the market leader. Despite this, BECTORS is seeing a demand uptick post April and expects a robust recovery from Q2, anticipating mid-teen growth for FY25. A trend towards premiumization was noted, with the premium share rising to ~37%, up from ~30% last year. BECTORS has enhanced its capabilities in the frozen bakery sector, focusing on both B2B and B2C customers with products such as filled puffs, artisan cookies, and dessert spreads.

Capacity expansion on track

BECTORS is focusing on expanding its direct distribution network to 0.31mn outlets. The company has signed an agreement to acquire a bakery plant from Mrs. Bectors Cremica Enterprises, enhancing its bakery operations in North India under the Cremica brand. Also, BECTORS plans to commercialize its bakery plants at Khopoli and Kolkata, as well as its biscuit plant at Dhar, by FY25.

Margin expansion despite heightened competition

Q4 EBITDA margin expanded 50bps YoY/16bps QoQ 14.4% (versus our expectation of 14.1%) due to a favorable business mix. BECTORS has initiated Project Impact 1.0 for cost transformation with focus on key enablers such as procurement, packaging, reducing wastage, logistics, sales & distribution. The benefit is likely to accrue from Q4FY25.

Valuations: Revise to Accumulate with TP unchanged at INR 1,414

We cut FY25E/26E earnings estimates 8%/5.8%, to factor in lower margin, higher depreciation and interest cost. We revise to Accumulate from Buy as the stock has run-up 19% in the past three months, with an unchanged TP of INR 1,414, as we assign 42x (from 40x due to improved outlook) on FY26E.

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SEBI Registration number is INH000000933