IGI Logo

Strong 1Q; Management maintains 20% revenue growth in FY27

Gopal Snacks (GSL)’s revenue grew 31.1% to INR4.2b, led by Wafers (+35.9% YoY) and Gathiya (+28.9% YoY). Gross margins increased 90bp to 26.9%. EBITDA improved by 107% YoY to INR315m, with EBITDA margins improving 270bp to 7.4%, as operating efficiency improved with the Rajkot plant now operational. GSL has taken a cumulative price increase and grammage reduction partly to mitigate raw material inflation of ~5-7%. Production from the temporary facility at Gondal has been consolidated at the Rajkot facility, which is expected to further lower manufacturing and transportation costs and improve dealer servicing. Management expects revenue to grow at 20%+ for FY27, fueled by distribution expansion, biweekly servicing in core states, and distribution automation. During 1Q, GSL added 54 distributors and has a total reach of ~0.52- 0.55m retail outlets, with a target to touch 0.6m retail outlets by the end of FY27.

Revenue growth aided by wafers and gathiya

GSL’s revenue grew 31.1% to INR4.2b, led by wafers (+35.9% YoY) and gathiya (+28.9% YoY). Pellets & extruded snacks and namkeen also grew at a robust 27% YoY and 23% YoY, respectively. Snack pellets saw the highest volume growth of ~26% YoY, followed by gathiya at 17% YoY, while namkeen and wafer volumes grew 14% and 11% YoY, respectively. Distribution expansion continued with GSL adding 54 distributors in 1Q, out of which ~26 dealers were added in the focus states. Core state revenue grew 27% YoY, focus states grew at 37%, while other states grew at a robust 79% YoY. Capacity utilization across the primary facilities stands at 32%. The Rajkot facility, which is now operational, is expected to aid the strong underlying demand across core and focus states. Consequently, capacity utilization is also expected to improve. The biweekly servicing to distributors in the core states is currently provided to ~38% of the outlets and has increased revenue run rates by ~20-25% in some cases. Management expects the core market to grow with biweekly servicing and distribution expansion, while focus and other markets are expected to grow with distribution footprint expansion and distribution automation.

Valuation and view: Reiterate BUY

We expect GSL to benefit from distribution expansion in non-core markets and commissioning of its Rajkot manufacturing facility, offering multi-quarter revenue growth visibility with strong underlying demand. We forecast a revenue/EBITDA/ APAT CAGR of 17%/40%/87% over FY26-28. We reiterate our BUY rating with a DCFbased TP of INR390 (based on an implied P/E of 40x on FY28E). Key risks: geographical concentration risk due to heavy reliance on Gujarat and potential supply chain disruptions, which could affect its market share and margins

For More Research Reports : Click Here 

For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH000000412