Q1FY24 Review: Mrs. Bectors Food : Stellar performance continues

8 Aug 2023 , 10:48 AM

Mrs. Bectors Foods (Cremica) reported a robust Q1FY24 performance with a primarily volume driven sales growth of 24% and sharp Ebitda margin expansion of 509bps to 15.5%. Direct reach in domestic biscuits has reached 0.25mn outlets and is on track to reach management’s target of 0.32mn outlets by FY24. With sufficient covers on wheat, management expects stability in the current Ebitda margin trajectory in the medium term. Analysts of IIFL Capital Services upgrade their EPS estimates by 6%/2%/2% for FY24/25/26 to factor in the Q1 beat. Analysts of IIFL Capital Services forecast sales/Ebitda/EPS Cagr of 17%/23%/24% respectively over FY23-26 and maintain BUY rating with a target price of Rs1,050. 

Strong beat on margins: 

Cremica delivered a robust performance in Q1FY24 with a sales growth of 24% (1% above estimate), broad based across biscuits and bakery segments. Growth was primarily volume driven with pricing growth at ~5-6% vs. ~12% in the previous quarter. Sharp expansion in gross margin and lower other expenses drove a strong beat in Ebitda (up 85% and 12% above estimate) and PAT (up 174% and 27% above estimate) with Ebitda margin expanding 509bps to 15.5%. 

Reiterate guidance of mid to high teens’ growth: 

Cremica’s direct reach in domestic biscuits stood at 0.25mn outlets vs. 0.216mn in Q4FY23 and 0.16mn in Q4FY22. The company remains on track to reach its distribution target of 0.32mn outlets by FY24. While input commodities such as wheat remain volatile, the company is covered for the next two quarters and sounded confident of maintaining its Ebitda margin at ~15% in the medium term (15.5% Ebitda margin delivered in Q1FY24). Management maintained its revenue growth guidance of mid to high teens growth in the medium term. 

EPS upgrade of 6%/2%/2%: 

Analysts of IIFL Capital Services upgrade their Ebitda estimates by 5- 6% for FY24-26 to factor in the margin beat in Q1. They increase their capex estimates and consequently, upgrade in their EPS estimates for FY25/26 is lower at ~2%. They are forecasting a 16% revenue growth in FY25/26 (vs. 19% in FY24) and there could be upside risks to these estimates if the stellar execution from Cremica continues. The stock is trading at 38x FY25 EPS, and analysts of IIFL Capital Services find the risk reward favourable. Maintain BUY rating with a target price of Rs1,050.