Stove Kraft is a good investment for Target Price of ₹824 (44.1% upside) says Yes Securities
Posted: Wed Aug 06, 2025 7:34 pm
Inline performance –Company’s revenue grew by 8.2% yoy in line with estimates majority contributed by E-Commerce, Modern Retail, Export at large. GT channel has contributed 22% to the revenue, however the channel growth continues to remain slow. Rural demand is witnessing revival resulting in positive sentiments in the upcoming festive season. The company expects a mid-teens growth for FY26 contributed by increase in ASP on back of change in mix towards higher value SKU’s.
Margins remains stable – Gross Margin continuous to remain stable above 38.0%, with company targeting gross margins of 40% in next couple of years. EBITDA margin came in at 10.5% expanding by 40bps yoy. Management is confident of improving EBITDA margin by 100bps for FY26. Operating leverage is now expected to kick in which should result in margin expansion. Increased inhouse production and backward integration of kettles and cast-iron cookware has further supported margin gains.
IKEA supply to start from Q3FY26- The company’s manufacturing line for IKEA is progressing as planned and is expected to begin dispatching goods by Dec’25 with the full benefit of this partnership expected to reflect from FY27 onwards. The company has already done investment of Rs300mn exclusively for this IKEA project.
Exports to grow at 50% in FY26 – STOVEKRA has a robust order book and is guiding 50% growth in exports. The company has a few USA and UK based customers in the pipeline and demand looks promising. Export growth for Q1 stood at 14% contributing 20% to the total topline. The company is guiding exports revenue to be Rs2.4bn for FY26 as it has acquired new customers and launched new products.
Distribution expansion to increase penetration –The company has expanded into 18 new cities this quarter and they have added 19 new stores operationalized in 18 new Cities mainly across 14 States in Northern & Western India in Q1. The company is looking to increase its penetration in the Northern region after making inroads in West.
Considering export opportunities and now with sustainable double digit margins potential we remain positive on the stock. We estimate STOVEKRA to deliver revenue CAGR of over FY25-27E of 14% which looks achievable given the export potential and pickup in domestic demand. We estimate EBITDA margin of 11.2% in FY26 in which is 30bps lower than management’s guidance. Management has started to deliver on its promise of margin improvement. We remain positive on the stock and continue to value the stock at 35x on FY27 EPS with PT of Rs824 and reiterate BUY rating.
Margins remains stable – Gross Margin continuous to remain stable above 38.0%, with company targeting gross margins of 40% in next couple of years. EBITDA margin came in at 10.5% expanding by 40bps yoy. Management is confident of improving EBITDA margin by 100bps for FY26. Operating leverage is now expected to kick in which should result in margin expansion. Increased inhouse production and backward integration of kettles and cast-iron cookware has further supported margin gains.
IKEA supply to start from Q3FY26- The company’s manufacturing line for IKEA is progressing as planned and is expected to begin dispatching goods by Dec’25 with the full benefit of this partnership expected to reflect from FY27 onwards. The company has already done investment of Rs300mn exclusively for this IKEA project.
Exports to grow at 50% in FY26 – STOVEKRA has a robust order book and is guiding 50% growth in exports. The company has a few USA and UK based customers in the pipeline and demand looks promising. Export growth for Q1 stood at 14% contributing 20% to the total topline. The company is guiding exports revenue to be Rs2.4bn for FY26 as it has acquired new customers and launched new products.
Distribution expansion to increase penetration –The company has expanded into 18 new cities this quarter and they have added 19 new stores operationalized in 18 new Cities mainly across 14 States in Northern & Western India in Q1. The company is looking to increase its penetration in the Northern region after making inroads in West.
Considering export opportunities and now with sustainable double digit margins potential we remain positive on the stock. We estimate STOVEKRA to deliver revenue CAGR of over FY25-27E of 14% which looks achievable given the export potential and pickup in domestic demand. We estimate EBITDA margin of 11.2% in FY26 in which is 30bps lower than management’s guidance. Management has started to deliver on its promise of margin improvement. We remain positive on the stock and continue to value the stock at 35x on FY27 EPS with PT of Rs824 and reiterate BUY rating.