Bikaji Foods volume recovery and Western Snacks growth support FY27 outlook despite cost pressure

Investment View and Valuation

Motilal Oswal Financial Services (MOFSL) retains its Buy view on Bikaji Foods International following the company's Q1 FY27 performance. The broker expects Bikaji Foods to benefit from accelerating demand for branded snacks, changing consumer preferences, and increasing traction in modern trade and e-commerce.

MOFSL expects industry-leading growth, led particularly by Western Snacks and followed by Ethnic Snacks, despite near-term raw-material cost inflation. The target price is Rs 770, based on a discounted cash flow valuation, and implies a FY28E P/E multiple of 55 times.

Q1 FY27 Financial Performance

Bikaji Foods reported Q1 FY27 revenue of Rs 7,343 million, up 12.5 per cent year on year, supported by approximately 7.7 per cent volume growth. Revenue was broadly in line with MOFSL's estimate of Rs 7,316 million. EBITDA increased 2.8 per cent year on year to Rs 990 million, 1 per cent below the broker's estimate, while adjusted PAT rose 1.6 per cent to Rs 595 million and was 4 per cent below estimate.

Western Snacks was the fastest-growing category, with year-on-year growth of 21.3 per cent. Ethnic Snacks grew 11.4 per cent and Packaged Sweets increased 4.4 per cent, while Papad declined 6.5 per cent.

Demand Recovery and Distribution Expansion

Management said the first 45 days of Q1 FY27 were affected by temporary production disruption following the Chairman's demise and by labour shortages. Demand recovered strongly from June 2026 and remained healthy in July 2026. Management said the final 45 days of the quarter delivered around 20 per cent growth.

Management remains confident of delivering more than 15 per cent growth in FY27, supported by the festive season, distribution expansion, and strong performance in core and focus markets.

• Direct coverage reached 371,000 outlets after approximately 17,000 additions during the quarter.
• Total reach stood at 1.5 million outlets.
• The company is targeting approximately 500,000 directly covered outlets over the next three years.
• The retail business grew around 72 per cent year on year, while the store network expanded to 28 stores from 15.

Margins, Costs and Business Trends

Margins were pressured by inflation in edible oil, pulses and packaging materials. Gross margin nevertheless expanded 70 basis points year on year to 35.7 per cent, helped by price increases of around 4.5 per cent and selective grammage reductions.

Q1 FY27 EBITDA margin was 13.5 per cent, down 130 basis points year on year. Excluding production-linked incentive benefits, EBITDA margin was 11.8 per cent, down 85 basis points.

Management expects FY27 EBITDA margin of 13.0 per cent to 13.5 per cent including production-linked incentive benefits. This outlook reflects higher advertising and promotion spending over the next three quarters. Management expects margin recovery through operating leverage and a favourable product mix.

Quick commerce and retail are growing strongly. Exports have been temporarily affected by higher freight costs and tariff-related uncertainty.

MOFSL Estimates and Growth Outlook

MOFSL forecasts revenue CAGR of around 15 per cent over FY26 to FY28, EBITDA CAGR excluding production-linked incentives of 20 per cent, and PAT CAGR excluding production-linked incentives of 26 per cent.

Following the lower margin guidance, the broker reduced its FY27E and FY28E EBITDA estimates by 6.2 per cent. It reduced PAT estimates by 8.3 per cent for FY27E and 8.7 per cent for FY28E.

Key Risks

• Geographic concentration in Bikaji Foods' core markets.
• Potential entry of new competitors into Rajasthan.