Stocks To Buy: Motilal Oswal bets on three consumer processed foods stocks for up to 26% upside

Brokerage firm Motilal Oswal initiated coverage on four consumer processed food stocks Bikaji Foods Ltd., Gopal Snacks Ltd., Prataap Snacks Ltd. and Mrs. Bectors Food Specialties Ltd.on Wednesday, January 7, of which it is bullish on the first three and "neutral" on the latter.

Barring Mrs. Bectors Foods, Motilal Oswal sees an upside potential of up to 26% from the other three names.

Motilal Oswal said the food and food processing sector in India, which is valued at ₹86.8 lakh crore in the financial year 2024, is projected to grow to ₹109.6 lakh crore by FY27.

It said the food processing

industry, which comprises 35% of the entire food sector, is set to clock a 9.7% compound annual growth rate (CAGR) over FY24-27. Within this sector, packaged foods make up 30-32% of the industry. The packaged food market is expected to record a CAGR of 11%, which comprises of staples (37%), other packaged food (35%), dairy (20%), beverages (6%) and meat (2%), Motilal Oswal's note said.

The brokerage added that the 'other packaged food' market in India is estimated at ₹36 lakh crore in FY24 and is set to grow to ₹63 lakh crore by FY29, indicating a 11.6% CAGR, driven by savoury, snacks, biscuits, confectionery and ready-to-eat.

Motilal Oswal cited lifestyle changes, urbanisation, growth of nuclear families, increased participation of working women as the reasons for the rapid expansion of higher packaged food consumption. However, the sector remains predominantly unorganised, accounting for around 80% of the market in FY24, thus offering substantial opportunities for organised players to capture market share, it said.

In the 'other packaged food' segment, savoury snacks (21%) and biscuits and bakery *17%) represent the largest categories.

Motilal Oswal said as per its analysis, savoury snacks and biscuits are set to clock 9% and 7% CAGR, respectively, over FY25-29.

It said the organised market accounts for 58% of the savoury snacks category and 95% of the biscuits category.

Biscuits were largely unorganised in the early 2000s and have experienced significant formalisation over the last two decades via brand expansion and improved distribution networks, it said.  A similar formalisation trend is anticipated in the savoury snacks, which offer greater potential for organised players, the analyst added.

Bikaji Foods International

Motilal Oswal has initiated a "buy" rating on the stock with a price target of ₹900 per share, a potential upside of 26% from its previous closing price.

It values the stock at a financial year 2028 estimated price-to-earnings multiple of 55 times.

It said the stock is well-positioned for robust growth to gain market share, supported by an expanding direct distribution network, improved capacity utilisation, enhanced brand visibility and diversification of its product portfolio.

It has forecast a revenue, earnings before interest tax depreciation and amortisation (EBITDA), and adjusted profit after tax (APAT) CAGR of 15%, 29% and 39%, respectively, over FY25-28.

Gopal Snacks

The brokerage has initiated a "buy" rating on Gopal Snacks with a target price of ₹400 per share, an upside potential of 24.5% from its previous close.

This implies a price-to-earnings multiple of 40 times its estimated FY28 earnings.

It said the company is likely to deliver strong revenue growth driven by product diversification beyond Gathiya. However, focused distribution expansion in key markets and a recovery in demand and core markets need to be monitored, it said.

It has projected revenue, EBITDA and APAT CAGR of 12%, 23% and 23%, respectively, over FY25-28.

Prataap Snacks

Motilal Oswal has initiated "buy" rating on the stock with a price target of ₹1,500 per share, a potential upside of 25.5% from its previous close.

This implies a price-to-earnings multiple of 45 times its estimated FY28 earnings.

It said the company has experienced a phase of underperformance. However, it anticipates a strong turnaround driven by plant consolidation and automation to enhance cost efficiency and strategic improvements in the distribution model to optimise channel margins and expand market reach.

It has projected a revenue and EBITDA CAGR of 11% and 57%, respectively, over FY25-28.

Mrs Bectors Food Specialties

Motilal Oswal has initiated a "neutral" rating on the stock with a price target of ₹280 per share, an upside of 16.8% from its previous close.

This implies a price-to-earnings multiple of 34 times its estimated FY28 earnings.

It said the company is one of the leading players in India's premium biscuit market with a 64% domestic portfolio and 36% international one. It expects revenue, EBITDA and APAT CAGR to clock in at 13%, 17% and 21%, respectively, over FY25-28.

Key Risks

As per Motilal Oswal, here are the key risks for the stocks

• Weak macroeconomic conditions may dampen consumer spending.


• Volatility in raw materials affecting cost margins.


• Intensifying competition from both organised and unorganised players.


• Price wars and competitive pressure may adversely impact profitability.

Also Read: Venezuela stock market surges 50% in a single session — Did it pre-empt the US action?