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Strengthening the long-term growth narrative

We maintain BUY, with a 9% increase in our Jun-26E TP to Rs900, on 65x P/E. In the last couple of years, the company has added revenue streams, which enhance the long-term outlook: a) its own Bikaji retail network (backend in place, will gain shape from FY27E); b) The Hazelnut Factory (40% stake) aiding the premium QSR play; c) Ariba (55% stake), aiding frozen snack exports and its own retail backend opportunity; d) addition of bakery capacity in the South, and e) a 50:50 joint venture plan with CG Group in Nepal. We see these steps taking longer to shape up; however, these would enhance Bikaji’s growth longevity. We raise our target multiple to 65x, from 60x. The management commentary around a rebound in growth from Q2 is promising; this, along with steady margins would aid earnings. We now expect a 40% EPS CAGR over FY25-28E.

Growth rebound in organic business expected from Q2FY26E

The management is upbeat about growth recovery ahead, where favorable seasonality will aid growth in sweets; also, expected easing in competition from players (offering discounts) to aid growth in western snacks. On demand, the mgmt noted that April was subdued, although demand recovery is visible MoM from May. While Q1FY26 saw 6% volume growth in organic business, the mgmt expects 9-10% in the rest of the year. We see possible high-teen consolidated revenue growth in the next two quarters, with ~4% inorganic business contribution. Gross margin recovery to ~34% (excl PLI) is sustainable, per the mgmt. With better rain, the mgmt expects favorable crop output, which will aid RM prices. Operating leverage and cost-optimization measures are likely to enhance the operating margin ahead.

Thrust on fortifying the long-term growth outlook

The mgmt is continuously adding revenue streams, where delivery will play out over the medium term. On retail operations, Bikaji’s retail operations would gain shape in FY27E, while The Hazelnut Factory is likely to have 10-11 store additions during the year and close FY26E with ARR of Rs1bn. The company is looking to widen its presence in Nepal (now, 55% customs duty is a competitive disadvantage), by entering a JV with CG Group. Under the new JV, the company is looking to enhance revenue to Rs500mn in the next 2Y, from ~Rs200mn. Local manufacturing will make offerings competitive where it is looking to leverage the distribution of CG Group. Bikaji is also setting up a bakery unit in South India which will enhance its play in biscuits and premium urban-centric portfolio (e-commerce-focused; including muffins and croissants).

Valuation continues to factor in new growth narratives; maintain BUY

As the demand outlook improves ahead, we see improving growth in the near term; this, with structural initiatives would likely stay in the long term. We see added optionality continuing to stretch valuations in the near term; valuations, however, will normalize as execution takes shape. We maintain BUY with a revised Jun-26 TP of Rs900, on 65x P/E.

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