Q3FY24 Review: Bikaji Foods: Festive season aids growth

6 Feb 2024 , 12:17 PM

Bikaji volume growth remains on track at ~17% for M9FY24 (higher for this quarter at 29.5% due to seasonality shift) with focus states volume growth ~12% higher than core states. However, Ebitda margin at 12% was below estimate due to higher RM cost and promotions. However, PLI benefit, which is expected at ~2% of sales in steady state is not recorded yet, and therefore analysts of IIFL Capital Services are not worried on mar gin estimates for next year. Analysts of IIFL Capital Services upgrade FY25/26 by ~5%/4% to account for good sales traction, and maintain buy with TP ₹640 (17% upside). 

Sales in line; miss on margins: 

Bikaji reported topline growth of ~23% driven by a volume growth of 29.5%. Ethnic snacks/ Western snacks and Papad reported a YoY sales growth of ~15%/10%/9% respectively whereas packaged sweets reported its best ever quarter with sales growing at ~83% on the back of a long festive season in Q3FY24. The gross mar gin (GM) expanded by 126bps but contracted by ~150bps QoQ largely (~90-100bps) on account of raw material inflation (QoQ inflation seen in Moth Magar, Moong dal and Chana besan). Ebitda margin expanded by ~120bps driven by GM expansion. 

Distribution expansion to drive growth: 

Bikaji is shifting from a super-stockist to a direct distribution model by adding CFA agents. It increased its direct reach by ~23k outlets and the direct coverage stood at 231k outlets (vs 208k in Q2FY24) and is well on track to scale it up to 250k outlets by FY24. In focus states (contributes to ~15% sales),the direct reach stood at 80k outlets which it plans to expand to ~150k+ by FY26. 

EPS upgrade for FY25/26 by ~4-5%: 

Analysts of IIFL Capital Services upgrade their sales estimate for FY24/25/26 by ~3-5% to factor in the strong sales traction. They expect the sales (ex-PLI) to grow at ~14-15% for Q4FY24.The company has guided that ₹970mn/₹450mn/₹600mn will be booked as PLI income in FY24/25/26. Analysts of IIFL Capital Services upgrade their EPS estimate for FY25/26 by ~5%/4%. Maintain BUY, TP ₹640.