Ventura Securities Initiates "Buy" On This Smallcap FMCG Stock For Robust Gains, Target Price Rs 497

Ventura Securities recommended buy the stock of Mrs Bectors Food Specialities Limited (MBFSL). The brokerage has given a target price of Rs 497 per share to the stock. With the given target price, the brokerage claims a potential upside of up to 20% from its current level.

Mrs Bectors Food Specialities is a small-cap FMCG sector company. It manufactures biscuits and bakery products that are marketed under Mrs. Bector's Cremica and Mrs. Bector's English Oven brands, respectively. It has a market capitalisation of Rs 2,455.25 crore.

Stock Outlook & Returns

The share price of Mrs Bectors Food Specialities stood at Rs 417.45 per share on NSE, up 3.01% compared to the previous close. Ths stock in 1 surged by 6.11%. In 1 month it surged by 8.44%, whereas, in 3 months it surged by 18.66%. The stock in 1 year surged by 6.1%. It was listed on 24 December 2020 on NSE. Since its listing date, it has given 29.75% negative returns.

 

On a healthy and delectable growth trajectory

Ventura Securities said, "Post our initiating coverage on Mrs Bectors Food Specialities Ltd (MBFSL) in Jun 2021, the stock underperformed street expectations on the back of a decline in profitability (EBITDA margins declined from 16.1% to 12.4% in FY22 and 11.7% in H1FY23) and delay in the operationalization of its Dhar facility in Madhya Pradesh. However, we believe that things are set to change due to"

• Optimum capacity utilization and logistical benefit: The upcoming Dhar facility will cater to southern and western India, which will subsequently free the MBFSL's northern facilities to focus on north India and the export market. This is expected to reduce the logistics cost and transportation time for the company. In addition, the company shifted 2 biscuit lines from Tahliwal (Himachal Pradesh) to Rajpura (Punjab) which is expected to reduce annual opex (labour & logistics) by INR 12 cr.

• Additional revenue and cash flow from the new facility: MBFSL has been witnessing significant demand for its Cremica biscuit brand in Maharashtra and Karnataka, which will be largely catered to by the new Dhar facility. Hence, we are expecting a higher capacity utilization of the Dhar unit.

While Cremica biscuits are gaining momentum, the direct distribution strategy to retailers worked well for the company in English Oven bread, which has a domestic market share of ~5% and a leading position in northern India. Another trigger is the supply of buns to QSRs, where MBFSL has strong B2B relations with KFC, McDonald's, Subway, Yum Brands, etc. QSR is a significantly underpenetrated format in India (less than 3 stores per mn people) compared to China (8), the US (200) and Europe (100).

Buy the stock for a target price of Rs 497 per share

MBFSL has been investing in new capacities and working on cost optimization to improve its profitability. The company is in a high growth phase and the steep valuation discount of >50% to industry peers is unwarranted. "We believe that as this growth story emanates, the valuation discount will narrow substantially. We initiate coverage on the stock with a BUY for a price target of INR 497 (22X FY25 P/E), representing a potential upside of 23% over the next 18 months," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of Ventura Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.