Motilal Oswal Picks 3 Food Stocks for Up to 26% Upside

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AuthorKavya Nair|Published at:
Motilal Oswal Picks 3 Food Stocks for Up to 26% Upside
Overview

Brokerage Motilal Oswal initiated coverage on four Indian processed food companies, identifying three—Bikaji Foods, Gopal Snacks, and Prataap Snacks—as 'Buy' candidates with up to 26% upside potential. The firm forecasts significant growth for the Indian food processing sector, driven by evolving consumer lifestyles and an expanding organized market share in packaged foods.

Brokerage Initiates Coverage on Packaged Food Stocks

Brokerage firm Motilal Oswal has initiated coverage on four Indian consumer processed food stocks, flagging Bikaji Foods Ltd., Gopal Snacks Ltd., and Prataap Snacks Ltd. for substantial upside potential, estimating gains of up to 26%. Mrs. Bectors Food Specialties Ltd. received a 'neutral' rating from the firm.

Sector Growth Outlook

The Indian food and food processing sector, valued at ₹86.8 lakh crore in FY24, is forecast to expand to ₹109.6 lakh crore by FY27. The food processing industry, representing 35% of the total food sector, is expected to achieve a compound annual growth rate (CAGR) of 9.7% from FY24 to FY27. Packaged foods constitute 30-32% of this industry, with an anticipated 11% CAGR.

Packaged Food Market Dynamics

Within packaged foods, the 'other packaged food' segment, including savoury snacks and biscuits, is a key growth driver. This market is estimated at ₹36 lakh crore in FY24 and projected to reach ₹63 lakh crore by FY29, exhibiting an 11.6% CAGR. Motilal Oswal attributes this expansion to changing lifestyles, urbanization, and the rise of nuclear families.

Organized Players' Opportunity

Despite the sector's growth, it remains largely unorganized, with organized players holding significant opportunities to capture market share. The savoury snacks and biscuits categories are identified as the largest, with expected CAGRs of 9% and 7% respectively from FY25 to FY29. Analysts see a trend of formalization, similar to the biscuit sector's transformation over the past two decades, now occurring in savoury snacks.

Company-Specific Targets

Motilal Oswal has set a price target of ₹900 for Bikaji Foods (26% upside) and ₹400 for Gopal Snacks (24.5% upside). Prataap Snacks is targeted at ₹1,500, representing a 25.5% potential gain. Mrs. Bectors Food Specialties has a target of ₹280 with a 16.8% upside. The brokerage projects strong revenue and profit growth for the 'buy' rated stocks.

Key Risks

Investors should note potential headwinds, including weak macroeconomic conditions impacting consumer spending, volatility in raw material costs, and intensifying competition from both organized and unorganized players.

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