Q2FY24 Review: Bikaji Foods: Sales in line; beat on margins

8 Nov 2023 , 11:04 AM

Bikaji Limited delivered a top-line growth of 5.5%, primarily driven by volume growth of 5.1%. Ebitda margin expanded by 328bps YoY to 14.4% (vs analysts of IIFL Capital Services estimate of 13.6%), primarily driven by softening of raw material prices, operational efficiency and superior mix. The top-line was affected due to a festive mismatch vs Q2FY23 especially in the packaged sweet segment. The focus markets continued to outperform the core markets by delivering a 11.2% YoY growth (vs 6.3% for core markets). As the coming quarter marks a long festive season, analysts of IIFL Capital Services estimate a mid-high teen sales growth in H2FY24. Analysts of IIFL Capital Services upgrade their EPS estimate for FY24/25 by ~1%/0.6%. Maintain BUY; TP Rs590. 

Beat on margins: 

The sales grew by 5.5% (in line with analysts of IIFL Capital Services estimate) driven by a volume growth 5.1%. The ethnic snacks and western snacks reported a growth of 10% and 9% respectively, with 17% YoY volume growth seen in salty snacks category. The packaged sweet category declined by 13% on account of festive mismatch vs Q2FY23 whereas the Papad category declined by 6% due to extended monsoons. The gross margin and Ebitda margin expanded by 545bps/328bps respectively. 

Distribution expansion: 

Bikaji is shifting from a super-stockist to a direct distribution model by adding CFA agents. In Q2FY24, the company increased its direct reach by ~46k and currently has a direct reach to 208k outlets (vs 162k outlets in Q1FY24). The company is giving more thrust on the western snacks portfolio as their market share in the western snack portfolio is much lower than that in the ethnic snacks. 

EPS upgrade for FY24/25 by ~1%/0.6%: 

Analysts of IIFL Capital Services cut their sales estimate for FY24/25/26 by ~4%. But with increase in capacity utilisation (currently at 45-50%), analysts of IIFL Capital Services build in margin expansion and the Ebitda margin to be in the range of ~14-15%. As a result of margin expansion, analysts of IIFL Capital Services upgrade their EPS estimate for FY24/25 by ~1%/0.6% while FY26 EPS estimate remaining unchanged.