Mrs Bector’s Food: Robust growth to continue

15 Jan 2024 , 11:50 AM

Mrs Bectors Foods Specialities Ltd (MBFSL) is one of IIFL’s top small-cap picks for 2024. Driven by distribution expansion and good execution, the company has driven sales growth of ~22% in H1FY24. Analysts of IIFL Capital Services expect this story to continue to play out, and forecast ~16%/18% sales and EPS Cagr over FY24-26; driven by steady execution across business verticals. At 45x FY25 EPS, analysts of IIFL Capital Services find the risk-reward favourable, given the higher growth as well as potential EPS upgrades. Maintain BUY; TP Rs1,375. 

Distribution expansion to drive growth in domestic biscuits: 

MBFSL has steadily expanded direct reach in domestic biscuits from 0.16mn outlets in FY22 to 0.27mn outlets, as at Sept’23; the company is on track to further increase it to 0.32mn outlets by the end of FY24. Steady and focused distribution expansion in the existing and newer regions (Central and South India), would drive revenue Cagr of ~15% over FY24-26 in this segment. At less than 5% market share in domestic biscuits, the potential in domestic biscuits is enormous. 

Bakery segment has been a consistent performer: 

Branded bakery has grown at a Cagr of ~23% over FY18-23; analysts of IIFL Capital Services forecast a Cagr of ~19% over FY24-26; driven by deeper penetration into the core market of Delhi NCR, expanding in towns in upcountry north India and cities such as Mumbai, Bengaluru and Pune. Owing to its strong manufacturing capabilities, MBFSL is well placed to leverage its longstanding relationships with QSR customers. This is to introduce new and innovative products and open up cross-selling opportunities in newer products as well as exploring markets beyond the QSR space. 

Reiterate BUY: 

Since the appointment of Mr. Manu Talwar as the CEO in May’2022, there has been a visible shift in MBFSL’s focus towards improving the quality of distribution; resulting in an acceleration in its growth trajectory. While at 45x FY25 EPS, valuation is reasonable, analysts of IIFL Capital Services believe high-teens growth can continue for multiple years, with a potential for EPS upgrades in the medium term. Analysts of IIFL Capital Services forecast 18% EPS Cagr over FY24-26 and maintain BUY rating on the stock with TP of Rs1,375.