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Robust revenue growth; margins to improve gradually

Prataap Snacks (PSL)’s revenue grew 20% YoY to INR5b in 1QFY27. Namkeen snacks outperformed with double-digit volume growth, followed by potato chips and extruded snacks. Management projects double-digit revenue growth over FY27, backed by higher growth in Namkeen, followed by Extruded Snacks. Gross margin contracted 138bp YoY to 27.2% for 1QFY27, due to the higher cost of raw materials, while EBITDA margin settled at 4.1% (-35bp YoY). We expect PSL’s revenue growth to continue at ~12-13%, led by a shift in the distribution model to two-tier, plant consolidation, greater contribution from owned manufacturing, and expansion in East India. Margins contracted due to higher palm oil & packaging costs (+20% YoY). However, we expect margins to expand to ~7-8% by FY28, led by cost optimization and calibrated price hikes. Mr. Arvind Kumar Mehta has resigned from the position of Chairman and Executive Director of PSL. Further, the Board has also approved the acquisition of RLOP Food Processing (currently does not have any operations) for a cash consideration of up to INR165m. The acquisition will enable PSL to secure leasehold land for greenfield expansion.

Robust revenue, led by the namkeen and potato chips portfolio

PSL’s revenue grew 20% YoY to INR5b in 4QFY26, led by improving consumption across key markets, stronger traction towards newly launched products, continued momentum across namkeen and potato chips, robust expansion in distribution network, and growing traction in emerging channels, particularly Q-com. Namkeen snacks outperformed with double-digit volume, followed by potato chips and extruded snacks. Management expects double-digit revenue growth over FY27, backed by higher growth in namkeen, followed by extruded snacks.

Margins contract on account of higher raw material costs

In 1Q, gross margin contracted 138bp YoY and 145bp QoQ to 27.2%, led by higher raw material costs (~73% of revenue). EBITDA grew 10% to INR203m, with EBITDA margin at 4.1% (-35bp YoY). APAT grew 257% to INR25m. The quarter witnessed significant inflationary pressures as key raw material prices like palm oil (~18-20% of RM cost) and packaging laminates (~15-16% of RM cost) have risen by ~20% YoY, due to the ongoing Iran-US war. Freight costs also increased during the period, affecting margins. Going forward, we expect margins to expand to ~7-8% by FY28, led by cost optimization and calibrated price hikes.

Valuation and view: Reiterate BUY

PSL is expected to deliver strong financial performance, with revenue growth driven by growth in the namkeen segment, followed by extruded snacks and potato chips, while margin improvement will be driven by a shift in the distribution model, plant consolidation, a shift to owned plants, and expansion in East India. We estimate a CAGR of 13% in revenue and 42% in EBITDA over FY26- 28, driven by volume growth and significant margin expansion. We reiterate our BUY rating with a DCF-based TP of INR1,350 (based on an implied P/E of 45x on Mar’28E). Key risks: potential supply chain disruptions impacting production and execution risks related to plant consolidation (refer to our IC note dated Jan’26).

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