Bikaji’s growth narrative continues to swiftly improve under its professional management, which has a dual focus”strengthening core operations and enhancing fundamentals through strategic M&A initiatives. Notably, Ariba Foods is expected to drive Bikaji’s aspirations in the frozen snacks category and bolster its branded outlet network, while The Hazelnut Factory positions the company in the upmarket segment with a focus on QSR. With organic business growth recovering to the low teens, a mid-single-digit revenue contribution from M&A initiatives, and with margin improvement on the horizon, we anticipate a robust ~35% earnings growth over FY25-27E. Emkay maintains BUY with Mar-26E target price of Rs 775, based on 60x P/E.
Thrust on sustaining mid-teen organic business growth
With capacities (utilization: ~47-48%) in place for the coming 3 years and thrust on distribution, we see low teen growth in the organic business, along with low double-digit volume growth and ~2% price growth. As the formal sector is sustaining low double-digit growth, we see the management aspiration of mid-teen growth as reasonable. A sudden dip in OPM to 6% in Q3FY25 would be recouped in the coming couple of quarters. Amid the inflation seen in Q3FY25, most commodities have seen a correction to the base level in Q4, while palm oil prices remain elevated. The expected correction in palm oil prices to a mid-single digit and a ~2% fresh price hike are likely to restore 13% OPM by Q2FY26E. On a low FY25 base, Emkay sees EBITDA CAGR at ~32% in FY25 -27E for Bikaji`s organic business.
M&As to boost growth outlook
The company has accelerated efforts in the export opportunity and QSR space with the acquisition of stakes in Ariba Foods and The Hazelnut Factory (THF). The acquisition of Ariba Foods is focused on centralized capacity for frozen snacks (largely B2B business) and is being seen as a backend for Bikaji`s brand outlet (QSR) aspirations. With 33% utilization, Ariba`s gross margin is above 50%, though its EBITDA is closer to breakeven levels. As Bikaji is looking to enhance utilization, Ariba is likely to log profitability from FY26E. The acquisition of THF is a premiumization strategy, with the company focusing on outlet expansion given healthy unit economics. THF is accretive on gross margin, but EBITDA margin is dilutive now; however, with scale up of the franchise, it is likely to turn EBITDA margin accretive in the long run. With relatively faster growth for M&As, we see revenue contributions at ~6-7% for FY26E and FY27E. As regards profitability, at this stage, both entities are margin dilutive but hold promise to be accretive in the long term, with scale.
Fundamentals firm; execution aligned with capability; maintain BUY
Emkay believes the worst of the inflationary impact is in the base, wherein easing in inflation is likely to help Bikaji recoup margins faster. With the low-teen organic business growth, addition of inorganic initiatives, and recovery in the FY26 margin profile, we see 34% earnings CAGR over FY25-27E. Emkay maintains BUY with Mar-26E TP of Rs775, on 60x P/E.
