 "Bikaji Foods rallies 9%, nears record high on heavy volumes")
Shares of Bikaji Foods International rallied 9 per cent to Rs 592.95 on the BSE in Friday’s intra-day trade backed by a four-fold jump in the average trading volumes on expectations of a sustained improvement in earning over the medium term, supported by synergies from the recently added capacities under the production linked investment (PLI) scheme. Also, receipt of PLI incentives would support its operating margins over the medium term.
At 11:52 am; Bikaji Foods was trading 8 per cent higher at Rs 590, as compared to 0.19 per cent rise in the S&P BSE Sensex. The stock had hit a record high of Rs 604.95 on January 30, 2024. As many as, a combined 1.89 million equity shares representing nearly 1 per cent of total equity of Bikaji changed hands on the NSE and BSE.
Bikaji is the third largest ethnic snacks company in India with an international footprint, selling Indian snacks and sweets, and is the second fastest growing company in the Indian organised snacks market. Bikaji Foods' product range includes six principal categories: bhujia, namkeen, packaged sweets, papad, western snacks as well as other snacks which primarily include gift packs (assortment), frozen food, mathri range, and cookies.
For the March quarter (Q4FY24), Bikaji reported a 199 per cent year-on-year (YoY) rise net profit at Rs 11.56 crore, driven by strong demand for its packaged sweets and snacks. Revenue from operations grew 33 per cent YoY at Rs 614.4 crore, with volume growth of 14.3 per cent YoY.
Earnings before interest, tax, depreciation, and amortisation (Ebitda) expanded to 26.30 per cent from 13.4 per cent. This was led by gross margin expansion by 1003 bps due to favourable material prices along with better product mix and realisation.
The company said in Q4FY24 PLI income amounted to Rs 93.05 crore (for FY 20-21, FY 21-22 and FY 22-23) as all commitments have been fulfilled. Going forward this will be recorded on accrual basis quarter on quarter. The management is hopeful that the company will receive a grant from the government before December 2024.
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Bikaji’s Q4FY24 revenue was broadly inline but profitability was tad better aided by higher than envisaged gross margins. Revenue trajectory was stable entirely led by volume growth and better than peers in packaged snacks. Overall FY24 performance was resilient both on revenue and profitability in challenging marketing context, said analysts at JM Financial Institutional Securities.
Going ahead, while core markets are likely to grow in low double digits, further acceleration in focus markets will be key monitorable. For FY25, management is targeting 13-15 per cent volume growth and expects some pricing growth (2-4 per cent) given the inflation in input costs, which along with better fixed cost absorption should help drive overall earnings growth. Given the superior growth profile & improving return metrics, premium valuations are likely to sustain, the brokerage firm said. It has ‘buy’ rating on the stock with a target price of Rs 600 per share.
Bikaji is reasonably well positioned in the domestic market, driven by its brand recognition and wide distribution network, which enable the company to increase its market penetration. Bikaji sells its products through a network of over ~2.4 lakh listed number of outlets and indirect distributors as well as carrying and forwarding(C&F) agents spread across India. Together with regular capacity additions and deepening market reach, this has enabled the company to clock a double-digit revenue growth over the recent years (4-year CAGR of ~22 per cent over FY2019-FY2023), the rating agency ICRA said in rationale.
However, ICRA notes the concentration of revenues in the North region (~55 per cent over the last five years, majorly from the Rajasthan market). Though Bikaji had ventured into tie-ups and setting up manufacturing units in other states, the ramp-up of operations, and market share gains in the new states would be monitored, going forward, it added.