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YES Securities
Stove Kraft (Buy)
Target: ₹1,217
CMP: ₹1,038.7
Stove Kraft delivered industry-leading revenue growth led by strong volume growth across product categories driven by the continued efforts on the distribution expansion across all channels.
The management remains confident of growing ahead of the industry at about 25 per cent CAGR. Gross margin contracted by 291bps due to high input prices of key raw materials. The company has already taken pricing actions that will normalise gross margins. Implementation of DMS will help in improving efficiency and provide inventory management solutions for effective working capital management.
We continue to remain positive on the stock and maintain our Buy rating as we see strong growth visibility coupled with an increase in the efficiencies in the near term. We have been conservative in our growth and margin assumptions given limited track record.
The company is estimated to deliver revenue CAGR of over FY21 24 of 22 per cent (fastest among peers) despite a higher base given the capacity ramp-up driving share gains.
We foresee a strong growth outlook in the domestic market led by market share gains coupled with increasing exports driving above industry growth rates, with continued backward integration and emphasis on working capital reduction driving stable margins and strong return ratios.
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