Asit C. Mehta has initiated coverage on Bikaji Foods International Ltd. (Bikaji) with a “BUY” rating and a target price of ₹775, highlighting the company’s strong market position, expanding distribution network, and growth potential in focus states. The brokerage firm believes Bikaji’s aggressive expansion in distribution, increasing brand presence, and diversification into frozen foods, quick-service restaurants (QSRs), and western snacks will drive its future growth.
Bikaji has significantly increased its distribution reach, growing by 78% since Q1FY24. The company currently has a retail presence in 11.5 lakh outlets and aims to expand to 13 lakh outlets in the medium term. To achieve this, it plans to add 50,000 direct outlets annually, bringing its direct coverage to 3.5 lakh outlets by FY26E. The focus states will witness 1.5x the outlet growth of core states, aiding Bikaji in gaining market share.
In terms of market share, Bikaji holds a mid-40% share in its core states, whereas its focus states have a much lower market share of 1.8%. The company plans to more than double this to 4.5% over the next three years by strengthening branding efforts and expanding its retail footprint. The company aims to move at least one or two focus states into its core market category during this period. Growth in these focus regions is targeted to be 1.5x of core states, supported by healthy distribution expansion and branding activities.
Bikaji has also completed a significant phase of capital expenditure to expand its manufacturing capacity to cater to rising demand across its core, focus states, and export markets. With most of its capex cycle now completed, the company is currently operating at a lower capacity utilization of 45% and aims to increase this to 70% over the next 3-4 years. This expansion will lead to cost efficiencies, improving return ratios, and stronger free cash flow generation, with minimal future capex requirements.
The company has already started benefiting from the government’s Production-Linked Incentive (PLI) scheme, which has contributed to improved EBITDA margins since Q4FY24. As capacity utilization levels rise, cost rationalization will further aid margin expansion. EBITDA is projected to grow at a CAGR of 29.9% over FY25E-27E, with revenue growth expected at 16.6% CAGR over the same period. The improving fixed asset turnover is also expected to enhance return ratios.
Asit C. Mehta projects a revenue, EBITDA, and PAT CAGR of 16.6%, 29.9%, and 37.4% respectively over FY25-27E, supported by strong volume growth, judicious price hikes, and operating leverage. The brokerage believes Bikaji’s existing brand strength in its core states will help replicate similar success in focus states, leading to long-term growth. The stock is currently trading at 52.9x/42.7x FY26/27E EPS, which is at a premium compared to other food processing companies, owing to strong growth potential and brand loyalty.
Assigning a multiple of 52x to FY27E EPS of ₹14.9, the brokerage arrives at a target price of ₹775, indicating an upside potential of 22.2%. While the company’s strong market position and expansion plans make it an attractive investment, key risks include raw material inflation and any potential slowdown in its distribution ramp-up.
