Mrs. Bectors Food’s Q3 results are not crunchy enough
Premium- While price hikes backed the growth in revenue, the decline in Ebitda margins y-o-y was a dampener
The December quarter (Q3FY22) results of Mrs. Bectors Food Specialties Ltd had both hits and misses. While price hikes backed the growth in revenue, the decline in earnings before interest, tax, depreciation and amortization (Ebitda) margins year-on-year (y-o-y) was a dampener.
Consolidated revenue increased by 17% y-o-y to Rs263 crore aided by growth across its biscuit and bakery segment. The festive season in India also helped sentiments. Despite a high base in Q3FY21, revenue in the biscuit segment grew by 11% y-o-y. The company, through its biscuits brand, Cremica, has a strong footing in North India and aspires to strengthen its presence in other regions. Further, it exports to more than 64 countries and revenue from export markets rose by double-digits y-o-y in Q3.
In the bakery segment, Mrs. Bectors reported 29% y-o-y revenue growth to Rs92 crore. Growing demand for quick service restaurants (QSR) with relaxing covid-19 restrictions has aided the institutional bakery sales which reported higher double-digit growth y-o-y.
Despite the price hikes taken by the company, rising raw material and packaging costs impacted its Ebitda margins that plunged by 500 basis points (bps) y-o-y and 150bps sequentially. One basis point is 0.01%. The company said it managed to offset some of the rising costs through cost control measures. Even so, the Ebitda margin of 12.6% in Q3 is below the guided range. “We note that in the previous quarter it had reported margin of 14.1%; it maintains the guided range of 14-15% for margins for next year" said analysts at ICICI Securities in a report.
Mrs. Bectors is also taking further price hikes in 4QFY22. “Along with increasing premiumization, the focus has been on (1) driving costs optimization measures, (2) calibrated price hikes in premium packs and some grammage cuts at the lower end and (3) reduction of trade schemes. Further, focus on providing differential offerings to customers may drive margin expansion" added the ICICI Securities analysts.
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The company’s shares listed on the stock exchanges in December 2020 with an opening price of Rs500 apiece on NSE, 74% above its issue price. The shares are now trading at Rs349 apiece. Going ahead, a rise in competitive environment and inefficient distribution expansion could be key risks for the stock.
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