IGI Logo

Healthy topline; margins under pressure

Bikaji Foods (BFL) delivered revenue growth of 13.0% YoY to INR9.4b, driven by ~5.0% YoY volume growth. Revenue rose 27.8% from the previous quarter. EBITDA fell 7.4% YoY to INR1,187m and PAT fell 11.2% YoY to INR690m. Western Snacks grew the fastest (+44.2% YoY to INR815m), followed by Ethnic Snacks (+19.7% YoY to INR5,751m), which is now at ~62.7% of the mix. Packaged Sweets fell 11.3% YoY and Papad fell 6.3% YoY. Impulse packs (+21.2% YoY) grew faster than family packs (+6.4% YoY). Direct coverage reached ~390k outlets, about 20k more than in June. Retail revenue rose 58.1% YoY to INR447m, and the store count went from 21 to 34.

Core markets lead; distribution keeps expanding

Core markets grew 17.5% YoY to INR5.9b and focus markets grew 7.6% YoY to INR1.3b. The ‘others’ market fell 13.2% YoY. For 1HFY27, revenue grew 12.8% YoY to INR16.7b, driven by 6.2% volume growth. 1H EBITDA fell 3.0% YoY to INR2,177m and 1H PAT fell 6.0% YoY to INR1,284m. Marketing initiatives were stepped up with an Amitabh Bachchan-led TV campaign, a KBC festive tie-up, a Paytm cashback scheme, and festive pushes across quick commerce, which are expected to support growth in the Diwali quarter

Commodity and cost pressure weigh on margins

Gross margin contracted 60bp YoY to 34.4% due to inflation in key commodities, but gross profit still grew 11.2% YoY to INR3,231m. EBITDA margin contracted 280bp YoY to 12.6% (90bp below 1Q), mainly due to higher marketing spend and fuel costs. EBIT fell 12.7% YoY to INR912m. Employee costs rose 18.7% YoY and other expenses grew 29.3%. Other income fell 29% YoY, finance costs rose 37%, while depreciation rose 16%.

Strong snacking momentum and festive recovery to drive 2H growth

Management highlighted that performance was impacted by the shift in Diwaliled sweets and gifting sales to 3Q. Management expects full-year growth of over 17%, supported by strong festive demand, with October growth exceeding 50% YoY. Focus markets are expected to grow 22-23% in 2H, while impulse packs continue to drive penetration, growing over 20%. The company announced a ~3- 3.5% price increase from 15th November, alongside grammage reduction, to offset elevated input costs. While 3Q margins are expected to remain under pressure, softer edible oil, packaging costs, and fresh crop arrivals should support normalization in 4Q, with operating margin is expected at ~13.5%. Distribution expansion, marketing investments, and THF's strong growth outlook remain key drivers of medium-term growth

Valuation and view: Reiterate BUY

We expect BFL to benefit from accelerating demand for branded snacks, shifting consumer preferences, and increasing traction within modern trade and ecommerce channels. BFL is set to deliver industry-leading growth, with revenue, EBITDA (ex PLI), and PAT (ex PLI) CAGRs of 15%, 19%, and 21% over FY26-28. We trim our earnings and reiterate our BUY rating with a DCF-based TP of INR640 (based on an implied P/E of 50x on FY28E). Key risks: Geographical concentration in core markets and potential entry of new competitors in Rajasthan.

For More Research Reports : Click Here 

For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH00000041