Value Migration from Un-organized to Organized FMCG Sector + Premiumization Theme + Major Capex Done during last 3 years + Plant Machinery doubled in last 3 years = Multibagger Idea
This stock idea / detailed report made public today - Multibagger Pick of Apr'22 - "Mrs Bectors Food Specialities Ltd (BFSL)" (BSE: 543253 | NSE: BECTORFOOD)
Note: Mrs Bectors Food Specialities Ltd stock idea was published in Aprβ22 @ Rs 304 per share, as on today (20th Dec 2022) it is trading around Rs 439 (Up 45% in 8 months) to all our PAID subscribers of Super 6 Platinum Plan where we identify 16 best-in-class micro-cap multibagger stocks in a year. Today we are making this report public for the benefit of all those investors who wish to join us. This is a niche business run by honest & ethical management, there is long runway of growth left for this company. To join WhatsApp to +91 9354179604 (Sanjay Gupta)
πππ Market Cap ~ βΉ1788 Cr | Value Migration from Un-organized to Organized FMCG Sector + Premiumization Theme | Revenue (FY24E) ~ βΉ1500 Cr Vs Revenue (FY21) βΉ881 Cr | ROCE / ROE = 21% / 19% | Market Cap to Sales = 1.86 | D/E ~ 0.3 | Major Capex done during last 3 years | Plant Machinery doubled in last 3 years | Honest & Visionary Management.
β Well-established player in the biscuit and breads segment in the Northern region of India. β
π Biscuit Division β The Company commands 4.5% market share in North India in the premium and mid-premium biscuits category. It is one of the largest biscuit exporters in India, delivering to 64 countries, with North America, East Africa and South Africa being its key markets. The company also does contract manufacturing for Oreo biscuits and Chocobakes cookies for Mondelez India.
π Bread Division β The Company manufactures various types of breads in the premium segment, including whole wheat, multigrain and sandwich breads, under the English Oven brand. The major markets serviced by BFSL include Delhi NCR, Mumbai, Pune and Bengaluru. It also sells frozen dough products and other varieties of breads, such as garlic bread and stuffed breads.
π Institutional Business (Huge tailwinds) - The Company is also the largest bun supplier to leading QSR customers such as Burger King India, Connaught Plaza Restaurants, Hardcastle Restaurants (the latter two are McDonalds India franchisees), and Yum! Restaurants. It has been the βpreferred supplierβ of burger buns and pan muffins(fresh) for Hardcastle Restaurants since 2007.
β Major CAPEX done during 2018-20 (Before IPO in Dec'20) ~ Rs 260 Cr β
π According to the DRHP filed in Dec 2020, from 2017 till Sep 2020, Bectors has invested nearly Rs 260 crore in setting up facilities for manufacturing biscuits and bakery products. New capacity is likely to come on-stream at the Rajpura facility from April 2022.
π IPO came in Dec'20 @ 288/share to raise 40 Cr fresh fund & 540 Cr OFS. Offer for Sale by existing PE firms who invested in this company earlier. Promoters have not sold even a single share during the IPO.
π Plant & Machinery was valued at Rs 163.1 Crore in 2018 (FY18 revenue was 691 Cr), now the Plant & Machinery is valued at Rs 305.80 Crores, increased by 2 fold, but FY22 revenue is still ~ Rs 960 Crores (TTM Basis). It means we can expect a huge jump in revenue during the next couple of years.
π The 2x increase in Plant Machinery will yield a revenue more than double its present size. We estimate the revenue by FY24 will cross a whooping figure of Rs 1500 Crores.
β Current Capex Operation (Greater Noida) from Q2FY22 & Ongoing Capex will start Operation (Rajpura) from Apr '22. β
π Existing Manufacturing Facilities - 1) Biscuits: Phillaur, Punjab ~ 27,000 MTPA; Rajpura, Punjab ~ 13600 MTPA; Tahliwal, HP ~ 34200 MTPA; 2) Bakery: Greater Noida, UP ~ Breads and bakery ~ 66 mn packs, Buns ~ 170mn packs, Frozen products ~ 12 mn packs; Khopoli, Maharashtra ~ Breads and bakery ~ 13 mn packs, Buns~ 171 mn packs.
π Capacity expansion is in progress of one bread & one bakery line in Greater Noida and one biscuit line in Rajpura.
π Under Biscuits segment a new unit at βRajpura, Punjabβ is expected to be operational by Q1FY23. Capacity of the Rajpura plant is ~ 300 MT/month. For Rajpura expansion capital raised 40 Crores from IPO.
π Under Bakery segment a new unit at βGreater Noida, Uttar Pradeshβ has commenced the operations from Q2FY22.
π Post operationalization of these new capacities, the company expects to achieve revenue of βΉ1500 crores from current βΉ881 crores in FY21. The Greater Noida plant commercialized by Q3FY22 and the operationalization of the Rajpura plant is expected by April 22.
π New capex operational in Khopoli plant (Breads and Buns facility). The company manufactures close to 11mn packs of bread at the Khopoli plant with the focus on markets of Mumbai and Pune regions. Company bought new land in Mumbai for future expansion endeavors.
π Bectors is also likely to invest Rs 100 crore from internal accruals to set up another plant in Dhar, Madhya Pradesh, which will come on-stream from April 2024.
β Mrs. Bector's has "Robust Business Model" but Trading at Discount β
π Since the products manufactured constitute daily essential needs of consumers, predictability of earnings is high with rising per capita income aiding conversion of mass to premium products (Premiumization).
π Even with the pandemic-led operational and demand disruptions in the institutional bakery segment affecting sales to its QSR customers, Mrs. Bector's Food reported a strong performance in FY2021 led by biscuits and retail bakery divisions, with a growth of ~16% in its revenue and operating margin of 16% as compared to previous three-years average of ~12%.
π The Company, in its domestic biscuits segment, delivered a healthy sales growth of 27% in 9MFY21, almost double that of the market leader Britannia. While Covid tailwinds have helped both players, BFSLβs efforts on improving distribution infrastructure and following a more aggressive approach towards sales have provided an edge over peers.
π Its in-house automation tool - PERI provides stockists & distributors real-time access to sales trends.
π Mrs. Bector Foods has in place a strong ESG framework focusing on all the three parameters Environment, Social & Governance.
π Trading at Discount : Bectors Mcap/Sales of 1.8x on TTM basis Vs Britannia Industries Mcap/Sales of 5.76 offers room for improvement given its prudent capital allocation strategy aimed at improving ROE with higher share of premium products.
π Achieved 230,000+ bread packet sales every day. Recorded a whooping revenue of Rs 960 Crores (TTM basis). Augmenting sales through an increase in distribution channels and E-Commerce platforms.
β Focus Areas: Portfolio Premiumization | Global markets for Biscuits exports | Product development and innovation | Social Media and E-Commerce Strengthening | Bakery Segment QSR Channels β
π Sustainable OPM ~ 14%, Capacity Utilization ~ 75%, Increase in raw material price passed on to customers.
π We believe the company is on track to capture a larger share of the huge market due to initiatives like (a) rapidly increasing distribution and continuous innovation in domestic biscuits, (b) capturing a greater biscuit export client share, (c) increasing market reach in branded breads, and (d) enhancing product portfolio and deepening relationships with leading QSR players.
π Given the management's clear focus we expect these strategies to play out effectively. We estimate BFSL to post revenue growth of 13-15% CAGR over FY21-24E, while we expect earnings to improve by 15% over the same period. Hence, our first year target of 500+ is very much possible.
π Solar power contract of 15 years ~ an investment of Rs 86 lakhs to fulfil the energy requirement of the companyβs operations.
πππ Mrs. Bector Foods provides a good investment opportunity in the consumer space. We believe that company will successfully capture Rs 1500 Crores revenue in the coming 2-3 Years. This is a secular growth story based on consumption themes, trading at reasonable valuation and likely to double its revenue in next 2-3 years. Downside is limited from CMP and one can comfortably buy & forget it for long term holdings. πππ