Britannia Industries
Britannia Industries
Research: India Infoline
Rating: Buy
CMP:Rs 1,408
India Infoline has recommended a ‘buy’ on Britannia Industries with a target price of Rs 1,789, an upside of 24.3%. Britannia registered strong 15.6% y-o-y growth in revenues at Rs 660 crore during Q3 FY08, aided by excise savings.
The enhancement in excise exemption purview to include biscuits with Rs 100/kg maximum retail price from Rs 50/kg covers almost 75-80% of Britannia’s biscuit portfolio, due to which, its key brands like Tiger, 50:50, Marie Gold, Nice, Milk Bikis and Good Day are now out of the excise ambit.
The increasing utilisation of the Baddi unit for manufacturing high-end products may have also helped to reduce excise duty. Net profit for the quarter increased by 147.7% y-o-y, driven by strong revenue growth, coupled with improved operating efficiency. Adjusted net profit, after voluntary retirement scheme cost of Rs 3.4 crore, rose by 176.8% y-o-y to Rs 45.4 crore, translating into an annualised EPS of Rs 76.
Since Britannia is the largest player in the fast-growing biscuits category, it is the biggest beneficiary of the excise exemption (biscuits priced below Rs 100/kg) on biscuits. India Infoline expects the reduction in excise duty, increasing capacity utilisation at Baddi and reduction in pack sizes to drive volumes and result in improved profitability, going forward.
Britannia is also looking at new growth triggers like acquisitions in new categories, both in India and overseas. At the current market price of Rs 1,439, the stock is trading at 16.1x FY09E EPS of Rs 89.4
