Earnings Call Transcript Analysis Report #
Bikaji Foods International Limited Q3 & 9M FY ‘25 Earnings Call Analysis #
Financial Performance #
Key Financial Metrics: #
- Q3 Revenue Growth: 12% (sales), 14.5% (revenue from operations)
- YTD Revenue Growth: 17% (15% excluding PLI)
- Volume Growth: 3% (reported), 8% (revenue volume growth)
- YTD Volume Growth: 11% (13.3% revenue volume)
- EBITDA Margin: 11.1% (Q3), 8% (Ebitda)
- Gross Margin: 32% (Q3), targeting 29-30% (Q4), and 30-31% over 3-4 months.
- PLI Income: Rs. 14 Crores per quarter (booked, not necessarily received).
Comparison with Previous Periods: #
- Q3 revenue growth was significantly lower than YTD growth, indicating a slowdown in the quarter. Volume was 3% vs 11% YTD.
- EBITDA margin was under pressure due to rising raw material costs (palm oil and potato).
Revised Guidance/Forecasts: #
- Targeting 13%-14% volume growth for the next three to four years.
- Expect gross margin improvement in Q4 (29-30%) and further improvement in the next two quarters to reach 30%-31%.
Areas of Growth/Decline: #
- Growth: Ethnic snacks (10.5% Q3, 12.2% YTD), Packaged sweets (11.2% Q3, 17.5% YTD), Papad (9.6% Q3, 15.3% YTD), Exports (32.6% Q3, 21% YTD), Focus States (14.7% Q3, 17.1% YTD).
- Decline/Flat: Western snacks (0.8% Q3, 16.5% YTD - conscious decision to reduce production due to high input costs).
Strategic Initiatives & Business Updates #
Strategic Announcements: #
- Focus on increasing direct reach: Reached 7.5 million outlets total, 3 Lakh outlets direct reach. Targeting adding 50.000 new outlets this year
- Marketing campaign (“Bikaji Khao London Jao”) successful in driving penetration and weighted distribution.
- Acquisition of Hazelnut Company.
New Products/Services/Markets: #
- Continued focus on regional product variations (e.g., “Teekha Toofan” in the northeast).
- The Hazelnut brand is expected to contribute Rs. 90-100 Crores in top-line next year.
Operational Changes: #
- Conscious decision to subdue western snacks production in Q3 due to high potato and oil prices.
- Focus on utilizing existing manufacturing capacity (65%-70% utilization).
Ongoing/Completed Projects: #
- First QSR outlet opening in Sikar, Rajasthan, “next week” (from Feb 7, 2025).
- Long-term purchase orders were made for all commodities.
Market & Competitive Landscape #
Industry Trends: #
- Challenging quarter for all FMCG companies due to rising input costs.
- Consumption trends improving in Q4 (January).
Competitive Positioning: #
- Bikaji claims to have gained market share in focus states (e.g., UP, Chhattisgarh, Karnataka).
- Management believes their large pack contribution is higher than competitors.
Market Challenges/Opportunities: #
- Inflationary pressure impacting consumer behavior (though Bikaji claims limited impact on down-trading).
- Opportunity to grow through increased direct reach and distribution.
Market Share/Positioning: #
- Gained market share across focus states, with specific examples given (30-60 basis points in UP, 300 basis points in Chhattisgarh).
Risk Factors & Challenges #
Concerns/Challenges: #
- Significant increase in edible oil and potato prices impacting gross margins.
- Impact of government taxes on palm oil prices.
Regulatory Issues: #
- Mention of receiving PLI (Production Linked Incentive) from the government, with audits and claims processes involved.
Supply Chain/Operational Constraints: #
- Temporary reduction in western snacks production due to high potato prices and availability issues.
Market Uncertainties: #
- Dependence on commodity prices, particularly edible oil and potatoes.
- Competitive pressure.
Forward-Looking Statements #
Outlook/Projections: #
- Positive signs for the economy in the coming years due to budget measures.
- Expect improvement in gross margins in Q4 and subsequent quarters.
- Western snacks production back on track.
- Expect Hazelnut to contribute Rs. 90-100 Crores top-line next year.
Commitments/Targets: #
- Targeting 13%-14% volume growth for the next three to four years.
- Targeting 65%-70% capacity utilization.
- Aiming to reach a gross margin of 30%-31% in the next three to four months.
Planned Investments/Priorities: #
- CAPEX of Rs. 40-50 Crores in Bikaji next year, primarily for efficiency improvements. Minimal CAPEX expected for Hazelnut.
- Focus on organic growth and utilizing existing capacity.
- Expansion of QSR outlets in Rajasthan.
Sentiment: #
- Cautiously optimistic, acknowledging Q3 challenges but expressing confidence in future improvement.
Q&A Insights #
Most Pressing Analyst Questions: #
- Segment-wise growth divergence (Q3 vs. nine months).
- Reasons for dramatic slowdown in volume growth.
- Impact of grammage cuts.
- ASP growth expectations for Q4.
- Timeline for margin recovery.
- Impact of raw material price volatility.
- Roadmap for capacity utilization.
- Market share gains in focus markets.
- Plans for the acquired Hazelnut Company.
- QSR rollout plans.
Management’s Responses: #
- Explained the reasons for segment-wise variations (Diwali timing, conscious decision on western snacks).
- Emphasized revenue volume growth (8%) over reported volume growth (3%).
- Detailed grammage cuts and price increase plans.
- Provided outlook for ASP and margin recovery.
- Outlined strategies for managing raw material volatility.
- Explained plans for utilizing existing capacity and future growth targets.
- Provided details on market share gains and regional strategies.
- Shared plans for Hazelnut and CAPEX.
- Confirmed QSR rollout in Sikar, Rajasthan.
Evasions/Indirect Answers: #
- Reluctance to provide specific gross margin figures for individual product categories.
New Information: #
- Quantified expected impact of price hikes on the ASP in the upcoming quarter
- Moth Dal deflation is around 14-15%.
- Quick Commerce is growing at 86%.
Management Tone & Sentiment #
Overall Tone: #
- The overall tone is cautiously optimistic. Management acknowledges the challenges faced in Q3 (primarily raw material price increases) but emphasizes corrective actions taken (price increases, grammage adjustments) and expresses confidence in future performance.
Changes in Language: #
- The language reflects a greater awareness of cost pressures compared to previous calls, where growth might have been the dominant theme.
Areas of Confidence: #
- Management is confident in their ability to recover margins, drive volume growth, expand distribution, and leverage their marketing initiatives. They are particularly confident about the prospects of the Hazelnut acquisition and their long-term growth strategy.
Areas of Concern: #
- The primary concern is clearly the volatility of raw material prices, particularly edible oil and potatoes. They express hope for government intervention to reduce import taxes on palm oil.
Summary of Most Important Takeaways #
- Q3 was a challenging quarter: Bikaji, like other FMCG companies, faced significant headwinds from rising raw material costs, impacting margins. Reported volume growth was low, but management stresses revenue volume growth was better.
- Corrective actions are underway: Price increases and grammage adjustments have been implemented, with further price hikes planned. Management expects margin recovery in Q4 and a return to previous levels in the next two quarters.
- Long-term growth strategy remains intact: Bikaji is committed to its long-term volume growth targets, focusing on increasing direct reach, expanding distribution, and leveraging marketing campaigns.
- Strategic acquisition: The acquisition of Hazelnut Company is expected to contribute significantly to revenue in the coming year.
- QSR expansion: Bikaji is piloting QSR outlets, starting in Rajasthan, with potential future expansion.
- Commodity hedging is already done, except for edible oils.