Company Overview:
Gopal Snacks Ltd is a fast-moving consumer goods company based in India, offering a wide range of delicious snacks under the brand name ‘Gopal’. Established as a partnership firm in 1999 and incorporated as a company in 2009, the company currently operates in 10 States and 2 Union Territories as of 1HFY24. Its wide range of products includes ethnic snacks like namkeen and gathiya, western snacks like wafers, extruded snacks, and snack pellets, as well as other fast-moving consumer goods such as papad, spices, gram flour or besan, noodles, rusk and soan papdi.
Key Highlights:
1. Diverse product portfolio: The company offers a diversified portfolio of savory snacks, including ethnic savories such as namkeen and gathiya and western snacks such as wafers, extruded snacks and snack pellets that cater to varied consumer tastes and preferences. The company’s portfolio as of 1HFY24 compromises of 84 products with 276 SKUs across product categories. The company also offers FMCG products that include papad, spices, besan or gram flour, chikki, nachos, noodles, rusk, soan papdi and washing bar.
2. Leadership positions in the Indian snack market: Gopal Snacks is the 2nd largest snack manufacturing company in Gujarat offering a diverse selection of quality products that strive to capture the Indian taste under the Gopal brand. The company is the largest manufacturer of gathiya in terms of production & sales volume and snack pellets in terms of production volume in India. Additionally, the company is the 2nd largest organized ethnic namkeen manufacturer in Gujarat, 4th largest organized ethnic savories brand (incl. gathiya) in India in terms of market share and 4th largest manufacturer of papad in India.
3. Vertically integrated manufacturing: The company operates 6 manufacturing facilities comprising three primary manufacturing facilities (Nagpur, Rajkot & Modasa) and three ancillary manufacturing facilities (Rajkot and Modasa). As of 1HFY24, the company’s aggregate annual installed capacity of stood at 3,03,669 MT in primary facilities and 1,01,060 MT in ancillary facilities respectively. These vertically located manufacturing facilities are set up with captive manufacturing capabilities for key raw materials such as besan, raw pellets and spices.
4. Robust distribution network: Gopal Snacks operates an extensive and well-established distribution network of 617 distributors spread across 10 States and 2 Union Territories. The company has a team of 741 members for sales and marketing. The company has developed longstanding relations with number of distributors who in turn have established sales channels with conventional grocery retailers, supermarkets and hypermarkets, which has helped the company penetrate urban, semiurban, rural regions effectively.
Valuation: The company is valued at FY23 P/E and 1HFY24 annualised P/E multiple of 44.5x and 44.9x respectively at the upper price band on post-issue capital. The company is the largest manufacturer of Gathiya (31% market share) and has ~20 market share in total ethnic savouries market in India. The company’s EBITDA/PAT has grown at a CAGR of 80%/130% from FY21 to FY23 and return ratios are relatively better than its peers. Indian organized ethnic namkeen and snack market is expected to grow at a CAGR of 11% between FY23–FY27 giving an edge to the company’s growth. We recommend to subscribe the issue for long term investment horizon.
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