Stove Kraft Q3 Results Review - Coco Stores To Drive Both Topline And Margins: Nirmal Bang
Higher backward integration to enhance gross margin.
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Nirmal Bang Report
Topline and Ebitda margin were below our estimates by 16.2% and 359 basis points due to lower-than-expected sales and operating de-leverage.
Sales channels such as GT (~41% contribution), E-Commerce (~30%), Modern Trade (~12%), original equipment manufacturer (~9%), Institutional/Corporate (~6%), and Retail (~3%) witnessed strong volume growth. Going forward, focus will be on growing the Retail channel (Company Owned and Company Operated stores – COCO) as it is comparatively a higher margin segment.
The management’s strategy is to cater to the mass segment and offer them a branded product at reasonable price points.
We maintain 'Accumulate' with a revised target price of Rs 470, valuing it at 17 times December 25E earning per share.
While we expect backward integration to expand margins, a tepid demand environment, higher operational costs, and elevated capex are expected to keep earnings in check.
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