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ICICI Securities
Mrs Bectors Food (Add)
Target: ₹450
CMP: ₹420.75
Topline print (Q4: 15 per cent and FY21: 16 per cent) was good in the context of (a) weak institutional business and (b) challenges in ramping-up distribution given on- ground issues. RM inflation impacted gross margins but price hikes and a series of measures have been taken – management appears confident of about 15 per cetn EBITDA margins by Q2-FY22, in our view.
While overall growth guidance of nearly 15 per cent and about 6-8 per cent for domestic biscuits for FY22 was a tad disappointing, measures are being taken to improve the medium-term trajectory.
We believe the expansion of domestic biscuits and branded breads business into new regions driven by sales initiatives will be a key driver for growth. Further, focus on premiumisation within existing product segments and provide differential offerings to customers may drive margin expansion.
We cut our FY22-23 earnings estimates by about 2 per cent; modelling revenue/EBITDA/PAT CAGR of 16/12/8 per cent over FY21-23. Maintain Add with a DCF-based target price of ₹450. At our target price, the stock will trade at 31x P/E multiple March’23E. Key downside risks are delays or failures distribution expansion or steep rise in competitive intensity and raw material prices.
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