Motilal Oswal Maintains 'Buy' Recommendation for Prataap Snacks, Targets Rs 1350

Prataap Snacks Sees Revenue Growth Despite Inflationary Pressures

Prataap Snacks (PSL) reported a 4.9% year-over-year (YoY) increase in revenue to INR4.2 billion in 4QFY26, driven by volume growth. The company's revenue growth was led by Namkeen Snacks, which saw double-digit volume growth, followed by Potato Chips and Extruded Snacks.

In response to the higher inflation rate of approximately 9%, PSL undertook a grammage reduction of around 6-8% to pre-GST levels. Despite these challenges, the company's management expects double-digit revenue growth over the next few years, underpinned by higher growth in Namkeen, followed by Extruded Snacks.

The company's gross margin expanded 310 basis points (bp) YoY to 28.6% in 4QFY26, driven by a favorable product mix. The earnings before interest, taxes, depreciation, and amortization (EBITDA) margin settled at 5.1%, an increase of 390bp YoY.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

We expect PSL's revenue growth to continue at a rate of 12-13%, driven by several strategic initiatives, including:

• A shift from a three-tier distribution model to a two-tier model
• Consolidating plants into one automated facility by FY28
• Transitioning from third-party to owned plants in North India
• Adding new lines for snacks in East India, which will help reduce freight costs

Outlook

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

We reiterate our BUY rating for Prataap Snacks, with a discounted cash flow (DCF) based target price of INR1,350 (based on an implied price-to-earnings ratio of 45x on March 28, 2028 estimates).

Key risks to the company's performance include potential supply chain disruptions and execution risks related to plant consolidation.