By Baniya Beast,
I’ve been researching Prataap Snacks for past fortnight. Research can be accessed here Prataap Snacks.
Highlighting certain points:
- Favorable macro variables and booming namkeen space should show 15-18% topline CAGR over next 4-5 years
- Unable to forecast but would like to see margin expansion (mainly at gross level, 150 bps). This is the key criteria for the stock re-rating
- WC management, debtors under control (7-8 days), inventory is pain which needs efficiency
Gross margin levers
–Increase in Average Selling Price (ASP) per product
– Rising share of high margin namkeen, sweets & premium offerings in the portfolio
–Enhanced brand strength by shifting from toy-led push to taste & brand-led pull
–Increasing scale via higher sales, from 1,000 cr to 2,000 cr
Operating margin levers
–lower freight cost on account of 3P model
–Increased flexibility by harnessing direct distribution network vs 3-tier distribution network will lead to savings in distribution cost
Company is available at throw-away valuation but it is margin kicker which will set the stock to fire. What if margins do not come as expected? I would expect the stock return similar to topline growth then.
This article was originally published by author Baniya Beast.