Target: ₹440

CMP: ₹380.60

Bikaji’s Q4-FY23 earnings print was sharply ahead of estimates, as miss on revenues was more than offset by much higher expansion in gross margins. Revenue growth performance was 4 per cent below our estimate, primarily due to some softness in demand seen in early part of the quarter, which eventually picked up in March.

The growth was primarily driven by volumes (low double-digit growth) during the quarter. In terms of segmental performance, ethnic snacks (Bhujia and Namkeen) and packaged snacks grew in double digits, Western snacks delivered strong performance growing at over 30 per cent in the quarter, while papad performance was relatively soft, with sales growth in high single digits. T

Input prices are typically lower due to fresh crop season from December-February, the same is likely to see some uptick in the coming months. While some of these gains might be invested back into the business to drive volume growth, we reckon that FY24 EBITDA margins (ex-PLI incentive) will still continue to improve over FY23.

Bikaji has strategically added new facilities to augment its manufacturing capabilities, which should help it improve direct reach in core markets, and scale up its presence in focus markets. With favourable raw material scenario, improving utilisation levels and capex largely done; profitability, return metrics and cash flow generation are expected to improve.