Stock to buy: Brokerage firm Anand Rathi has initiated coverage on Bikaji Foods shares, the third-largest ethnic snacks company in India. Apart from snacks, Bikaji Foods International is also the third-largest player in sweets and the second-largest papad maker pan-India backed by its extensive portfolio and strong branding.
The rise in urban culture and fast-paced lifestyles has given a boost to processed foods such as ready-to-eat products apart from regular meals for millennials, a trend which further received a thrust from consumers’ taste and preferences, Anand Rathi said in a report.
Bikaji Foods International sells its products primarily through general trade, modern trade, and ecommerce platform, as well as exports. Over the years, the company has developed a large Pan-India distribution network. As of March 2024, it had 3 depots, 37 super stockists, 1,917 direct and indirect distributors that work with its super stockists, who are located across 25 states and 4 union territories in India.
The company’s foods revenue and EBITDA increased by 21% and 42% CAGR from FY19 to FY24 (including PLI impact) on account of healthy product mix, operational efficiency and brand visibility. Over the years, the company delivered healthy volume growth, margin expansion on the back of capacity expansion and operating efficiency, the brokerage report noted.
“Bikaji with its strong portfolio, established distribution network backed by preferred brands are well placed to report profitability. We believe that the company’s Revenue, EBITDA and PAT is expected to grow at a CAGR of 20%, 24% and 25% respectively over FY24-26E,” Anand Rathi said.
The brokerage firm initiated its coverage on Bikaji Foods shares with a ‘Buy’ rating by assigning 54x of FY26E earnings with a target price of ₹900 per share, implying an upside potential of more than 24% from Friday’s closing price, for a time horizon of 12 months.
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However, the brokerage believes key risks for the company include high dependency on core markets and its exposure to sharp fluctuations in raw material prices. Moreover, any hike in input cost cannot be entirely passed on to customers due to the competitive environment. Higher competition from the unorganized market is also another key risk.
Bikaji Foods share price has gained over 40% in one month and more than 47% in the past three months. The stock is up nearly 75% in one year.
On Friday, Bikaji Foods shares ended 1.49% higher at ₹725.15 apiece on the BSE.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 17 Jun 2024, 08:35 AM IST
