Multi Baggers

Britannia Industries

Britannia Industries is one of the biggest brands of the country, has a market share of 33%. More-than-a-century old Britannia has launched big brands in FMCG Segment.

The company’ bread, cake and rusk portfolio has grown more than five times in the last five years and its dairy portfolio has
doubled in four years.

The company has launched new products in biscuits to capture the growing trend for healthier snacks and to widen the appeal
for biscuits-competing with chocolates. It has launched new products like ‘Nutri Choice Diabetic Friendly’, ‘Treat Choco-Decker’ and ‘Britannia Healthy Start’ during the year to tap new opportunity segments.

The company has registered strong numbers for the quarter ending March 2011. Revenues surged about 20% from a year ago quarter to stay at Rs.11237.80 million translating operating profit of Rs.705 million which skyrocketed from year ago quarter. It witnessed a turnaround performance on a reported PAT basis, despite of interest expense surging manifold.

Operating profit margin stood at 6.27%, turned positive from last year’s level and an expansion of 90bps from preceding quarter. Increase in volumes together with better product mix has lead to this kind of growth for the company. Even ease in input prices also helped.

Britannia expects new launches within bakery-cake, bread or even biscuits segment together with new introductions in dairy
business. It also expects to increase its foray in café business.

Valuation:

Presently, the stock is trading at Rs 469.60 which is at a standalone PE of 28.88x and 24.09x to its FY12E and FY13E EPS of Rs 16.26 and Rs.19.49 respectively. Since the stock offers good investment opportunity, we initiate a ‘BUY’ signal on the stock with a target price of Rs 600 expecting an appreciation of about 28% from the current level with the short to medium term investment horizon.