Q4FY23 Review: Mrs Bectors Food: Growth momentum continues

Mrs Bector’s Cremica (MBFSL) reported yet another stellar quarter with broad-based 37%YoY growth in top line, driven by volumes growing at 20%+ YoY and 385bps YoY improvement in Ebitda margin to 13.9%. Top-line growth is likely to be robust in the medium term, driven by distribution expansion efforts in both domestic and export markets.

Large beat: 

MBFSL reported 37.2%YoY increase in sales (2% above IIFL Capital Services estimates), driven by a broad-based growth in Biscuits (42%YoY) and Bakery (35% YoY). The company was able to record robust volume growth of 20%+ (vs low-single-digit volume growth for Britannia), driven by distribution expansion efforts in focus markets of UP, Rajasthan and Middle-East (exports). Ebitda grew 90%YoY and was 9% above analysts of IIFL Capital Services estimates, with Ebitda margin increasing 385bpsYoY to 13.9% — largely driven by operating leverage.

Doubling distribution expansion to fuel growth: 

The company is doubling its distribution expansion from 160k in FY22 end to 320k by FY24-end (220k currently). This has brought in superlative volume growth in FY23. MBFSL is setting up its own distribution network in the Gulf region, which is giving boost to exports. After receiving positive response in Mumbai, Pune and Bangalore in FY23, the company plans to expand into 2 additional large cities. While demand remains strong, capacity constraints pose a challenge with the company running at 82-83% blended capacity utilisation as on the end of Mar’23. The company is adding new Biscuit and Bakery lines to cope with the growing demand, for which it would incur a capex of Rs1.2bn in FY24.

EPS upgrades: 

Factoring in the Q4 beat and continued growth momentum, analysts of IIFL Capital Services upgrade their EPS estimate for FY24/FY25 by 13%/10%. Distribution expansion in Biscuits and Bakery, and steady performance in institutional buns with expected revival of QSR sector — are likely to power robust top-line growth in the medium term. They forecast it to clock revenue/Ebitda/PAT Cagr of 17%/21%/24% over FY23-26; maintain BUY rating with a TP of Rs840.