Post on 04-Sep-2021
transcript
November 15, 2019 1
Rating: ACCUMULATE | CMP: Rs3,196 | TP: Rs3,433
Story remains on track; Accumulate
Quick Pointers:
Volume growth at 3%, Market share gain continue
2Q Inflation at 3%, forward covers extended till February
Croissants issue resolved, taking salted snacks to west India
We retain positive view on BRIT despite near term growth headwinds given
that the company remains on track with its strategic plans and milestones
like 1) distribution expansion in Rural India and Hindi heartland 2) Innovation
and renovation of Biscuits portfolio 3) Initial success in cream wafers,
Milkshakes and salted snacks and 4) Rs2.7bn from cost efficiency program
(Rs2.25bn in FY18 and FY19).
Volume growth has seen moderation from past few quarters and we expect
slow recovery. We are increasing estimates by 4.1% for FY20 mainly led by
lower tax rates while EPS estimates for FY21 are being cut by 0.5%
respectively. We estimate 19.2% PAT CAGR over FY19-22 and value the stock
at 45x Sept21 EPS. We arrive at a SOTP based target price of Rs3433 (Rs.3307
earlier). Retain Accumulate.
Concall Takeaways: 1) Stronger recovery only after 9 months from now. Market
share gains in hindi belt continues, despite slowdown 2) BRIT now has forward
covers for Raw Material till February, opportunist buying done in Q2 has lead to
increase in inventory 3) Increased direct reach by 30000 outlets in Q2 and focus is
now to get more SKU’s in existing outlets. 4) Salty snacks continue gaining market
share. Launch done in west as well which will be an acid test as it has many value
players. 5) In milk shakes it has 20%+ market share in less than a year (no. 2
brand). 6) Croissant had some back end issues which are now resolved and within
1 month will surpass Bauli in distribution 7) Some new launches have been
postponed on the back of slowdown however ad spends remain at same levels. 8)
Rural is still growing faster than urban but from industry stand point urban is growing
faster than rural. 9) Ranjangaon plant has 12 operational lines now (capacity of ~
140,000 TPA) 10) Capex also slowed down to Rs1.7 bn in 1H. 11) ICD to group
companies has not changed at Rs4.50bn at rate of 10%. 12) Biscuit is 75% of sales.
In 2 years it may go down to 70%. 13) Middle East & Africa continues to be
challenging, America is growing in double digits. Nepal operations doing well and
market share is increasing.
Domestic Volume growth at 3%: Net sales increased by 7.1% YoY to Rs 28.96bn.
Gross profit increased 7.7% with 20bps margin expansion (60bps decline QoQ on
increase in milk prices, wheat & palm oil prices). EBITDA increased 10.8% to
Rs4.7bn on 70 bps decline in other expenses even as staff cost increased 40bps.
PBT from operation were up 6.8%. PAT increased 61% to Rs 4.6bn mainly on the
back of tax benefits and increase in other income by 230% because of dividend
payment of Rs 665 mn from subsidiary. There was exceptional profit of Rs 350 mn
for reversal of provision of diminution in value of investment.
Britannia Industries (BRIT IN)
November 15, 2019
Q2FY20 Result Update
☑ Change in Estimates | ☑ Target | Reco
Change in Estimates
Current Previous
FY20E FY21E FY20E FY21E
Rating ACCUMULATE ACCUMULATE
Target Price 3,433 3,307
Sales (Rs. m) 113,423 128,071 114,152 128,887
% Chng. (0.6) (0.6)
EBITDA (Rs. m) 17,897 20,,999 18,027 21,151
% Chng. (0.7) (0.7)
EPS (Rs.) 58.8 66.1 56.5 66.5
% Chng. 4.1 (0.5)
Key Financials - Standalone
Y/e Mar FY19 FY20E FY21E FY22E
Sales (Rs. m) 104,825 113,423 128,071 145,892
EBITDA (Rs. m) 16,621 17,897 20,999 24,923
Margin (%) 15.9 15.8 16.4 17.1
PAT (Rs. m) 11,222 14,134 15,889 18,973
EPS (Rs.) 46.7 58.8 66.1 79.0
Gr. (%) 16.6 25.9 12.4 19.4
DPS (Rs.) 15.0 17.8 21.5 26.0
Yield (%) 0.5 0.6 0.7 0.8
RoE (%) 30.9 33.9 32.8 31.6
RoCE (%) 41.8 35.8 34.3 35.6
EV/Sales (x) 7.2 6.6 5.8 5.0
EV/EBITDA (x) 45.1 42.0 35.4 29.4
PE (x) 68.4 54.3 48.3 40.5
P/BV (x) 19.0 17.9 14.3 11.6
Key Data BRIT.BO | BRIT IN
52-W High / Low Rs.3,584 / Rs.2,300
Sensex / Nifty 40,357 / 11,895
Market Cap Rs.768bn/ $ 10,696m
Shares Outstanding 240m
3M Avg. Daily Value Rs.3718.68m
Shareholding Pattern (%)
Promoter’s 50.66
Foreign 15.22
Domestic Institution 13.57
Public & Others 20.55
Promoter Pledge (Rs bn) -
Stock Performance (%)
1M 6M 12M
Absolute 0.5 18.9 9.8
Relative (4.2) 9.3 (4.0)
Amnish Aggarwal
amnishaggarwal@plindia.com | 91-22-66322233
Darsh Gada
darshgada@plindia.com | 91-22-66322256
Britannia Industries
November 15, 2019 2
2QFY20 Result Overview: Sales up 7.1% led by 3% volume growth
Y/e March (Rs m) Q2FY20 Q2FY19 YoY gr. (%) Q1FY20 H1FY20 H1FY19 YoY gr. (%)
Net Sales 28,961 27,046 7.1 25,795 54,756 51,113 7.1
Gross Profit 11,412 10,600 7.7 10,307 21,720 20,022 8.5
Margins (%) 39.4 39.2 0.2 40.0 39.7 39.2 0.5
Other Expenses 6,709 6,354 5.6 6,425 13,134 12,098 8.6
% of Sales 23.2 23.5 -0.3 24.9 24.0 23.7 0.3
EBITDA 4,704 4,247 10.8 3,882 8,586 7,924 8.3
Margins (%) 16.2 15.7 0.5 15.0 15.7 15.5 0.2
Depreciation 367 315 16.4 373 739 619 19.5
Interest 140 4 83 224 8
Other Income 1,302 395 229.4 655 1,957 781 150.7
PBT 5,499 4,323 27.2 4,081 9,580 8,078 18.6
Tax 923 1,488 (38.0) 1,419 2,342 2,780 (15.7)
Tax Rate (%) 16.8 34.4 -17.6 34.8 24.4 34.4 -10.0
Adjusted PAT 4,576 2,836 61.4 2,662 7,238 5,298 36.6
Source: Company, PL
Volume growth at 3% in 2Q
11.010.0
8
7.0
1.52.0
2.5
6.0
13.012.0
13.012.0
7.0 7.0
3.0 3.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Q3F
Y16
Q4F
Y16
Q1F
Y17
Q2F
Y17
Q3F
Y17
Q4F
Y17
Q1F
Y18
Q2F
Y18
Q3F
Y18
Q4F
Y18
Q1F
Y19
Q2F
Y19
Q3F
Y19
Q4F
Y19
Q1F
Y20
Q2F
Y20
Source: Company Data, PL Research
Overall inflation at 3% as BRIT took forward contracts and higher stock buying
Source: Company, PL
Britannia Industries
November 15, 2019 3
BRIT continues to increase GAP with No2 player in biscuits category
Source: Company, PL
Hindi belt has been impacted by slowdown in rural India; Direct reach has increased to 2.13mn outlets
Source: Company, PL
Britannia Industries
November 15, 2019 4
New launches firing with Croissant and Milk shakes leading the growth
Source: Company, PL
Continuous innovation and relaunches continue
Source: Company, PL
Britannia Industries
November 15, 2019 5
Financials
Income Statement (Rs m)
Y/e Mar FY19 FY20E FY21E FY22E
Net Revenues 104,825 113,423 128,071 145,892
YoY gr. (%) 12.7 8.2 12.9 13.9
Cost of Goods Sold 62,776 68,142 76,704 87,345
Gross Profit 42,048 45,281 51,367 58,546
Margin (%) 40.1 39.9 40.1 40.1
Employee Cost 3,216 3,824 4,067 4,346
Other Expenses 5,985 6,587 7,391 8,252
EBITDA 16,621 17,897 20,999 24,923
YoY gr. (%) 16.4 7.7 17.3 18.7
Margin (%) 15.9 15.8 16.4 17.1
Depreciation and Amortization 1,350 1,663 1,961 2,224
EBIT 15,271 16,234 19,038 22,699
Margin (%) 14.6 14.3 14.9 15.6
Net Interest 15 647 557 557
Other Income 1,905 3,226 2,953 3,453
Profit Before Tax 17,161 18,813 21,434 25,595
Margin (%) 16.4 16.6 16.7 17.5
Total Tax 5,939 4,679 5,545 6,621
Effective tax rate (%) 34.6 24.9 25.9 25.9
Profit after tax 11,222 14,134 15,889 18,973
Minority interest - - - -
Share Profit from Associate - - - -
Adjusted PAT 11,222 14,134 15,889 18,973
YoY gr. (%) 16.7 25.9 12.4 19.4
Margin (%) 10.7 12.5 12.4 13.0
Extra Ord. Income / (Exp) - - - -
Reported PAT 11,222 14,134 15,889 18,973
YoY gr. (%) 18.8 25.9 12.4 19.4
Margin (%) 10.7 12.5 12.4 13.0
Other Comprehensive Income (21) - - -
Total Comprehensive Income 11,201 14,134 15,889 18,973
Equity Shares O/s (m) 240 240 240 240
EPS (Rs) 46.7 58.8 66.1 79.0
Source: Company Data, PL Research
Balance Sheet Abstract (Rs m)
Y/e Mar FY19 FY20E FY21E FY22E
Non-Current Assets
Gross Block 21,961 26,501 30,546 34,096
Tangibles 21,583 26,083 30,083 33,583
Intangibles 378 418 463 513
Acc: Dep / Amortization 8,685 10,348 12,309 14,533
Tangibles 8,383 10,006 11,923 14,099
Intangibles 302 342 386 435
Net fixed assets 13,276 16,153 18,237 19,563
Tangibles 13,200 16,076 18,160 19,484
Intangibles 76 76 77 79
Capital Work In Progress 649 1,399 1,899 2,399
Goodwill - - - -
Non-Current Investments 11,607 11,583 11,709 11,860
Net Deferred tax assets (39) 18 (132) (311)
Other Non-Current Assets 295 142 162 193
Current Assets
Investments 17,117 22,964 30,934 34,495
Inventories 7,189 7,873 9,023 10,286
Trade receivables 3,510 3,708 4,032 4,403
Cash & Bank Balance 405 503 555 617
Other Current Assets 2,438 2,812 3,177 3,622
Total Assets 56,491 67,266 79,723 87,272
Equity
Equity Share Capital 240 240 240 240
Other Equity 40,154 42,763 53,495 66,240
Total Networth 40,395 43,003 53,735 66,480
Non-Current Liabilities
Long Term borrowings 3 7,214 7,214 4
Provisions - - - -
Other non current liabilities - - - -
Current Liabilities
ST Debt / Current of LT Debt 19 - - -
Trade payables 10,325 10,973 12,102 13,411
Other current liabilities 5,480 5,793 6,373 7,063
Total Equity & Liabilities 56,491 67,268 79,723 87,272
Source: Company Data, PL Research
Britannia Industries
November 15, 2019 6
Cash Flow (Rs m)
Y/e Mar FY19 FY20E FY21E FY22E Year
PBT 17,161 18,813 21,434 25,595
Add. Depreciation 1,350 1,663 1,961 2,224
Add. Interest 15 647 557 557
Less Financial Other Income 1,905 3,226 2,953 3,453
Add. Other (3,276) (4,500) (4,519) (5,336)
Op. profit before WC changes 15,251 16,624 19,432 23,040
Net Changes-WC (1,185) (6,195) (8,102) (3,644)
Direct tax (5,939) (4,679) (5,545) (6,621)
Net cash from Op. activities 8,126 5,749 5,786 12,775
Capital expenditures (2,960) (5,290) (4,545) (4,050)
Interest / Dividend Income 1,816 3,206 2,935 3,435
Others (5,243) - - -
Net Cash from Invt. activities (6,387) (2,084) (1,610) (615)
Issue of share cap. / premium 1,560 (5,767) 1,589 1,897
Debt changes (204) 7,193 - (7,210)
Dividend paid (3,619) (4,346) (5,157) (6,229)
Interest paid (15) (647) (557) (557)
Others - - - -
Net cash from Fin. activities (2,278) (3,567) (4,125) (12,098)
Net change in cash (539) 99 51 62
Free Cash Flow 5,167 459 1,241 8,725
Source: Company Data, PL Research
Quarterly Financials (Rs m)
Y/e Mar Q3FY19 Q4FY19 Q1FY20 Q2FY20
Net Revenue 27,032 26,681 25,795 28,961
YoY gr. (%) 12.1 11.7 7.2 7.1
Raw Material Expenses 15,915 15,770 15,487 17,549
Gross Profit 11,117 10,912 10,307 11,412
Margin (%) 41.1 40.9 40.0 39.4
EBITDA 4,463 4,222 3,882 4,704
YoY gr. (%) 19.1 14.2 5.6 10.8
Margin (%) 16.5 15.8 15.0 16.2
Depreciation / Depletion 369 363 373 367
EBIT 4,094 3,859 3,509 4,337
Margin (%) 15.1 14.5 13.6 15.0
Net Interest 4 3 83 140
Other Income 554 583 655 1,302
Profit before Tax 4,645 4,439 4,081 5,499
Margin (%) 17.2 16.6 15.8 19.0
Total Tax 1,618 1,542 1,419 923
Effective tax rate (%) 34.8 34.7 34.8 16.8
Profit after Tax 3,027 2,897 2,662 4,576
Minority interest - - - -
Share Profit from Associates - - - -
Adjusted PAT 3,027 2,897 2,662 4,576
YoY gr. (%) 21.5 18.4 8.1 61.4
Margin (%) 11.2 10.9 10.3 15.8
Extra Ord. Income / (Exp) - - (161) 350
Reported PAT 3,027 2,897 2,501 4,926
YoY gr. (%) 21.5 18.4 1.6 73.7
Margin (%) 11.2 10.9 9.7 17.0
Other Comprehensive Income (1) (18) - -
Total Comprehensive Income 3,026 2,879 2,501 4,926
Avg. Shares O/s (m) 240 240 240 240
EPS (Rs) 12.6 12.1 11.1 19.1
Source: Company Data, PL Research
Key Financial Metrics
Y/e Mar FY19 FY20E FY21E FY22E
Per Share(Rs)
EPS 46.7 58.8 66.1 79.0
CEPS 52.3 65.7 74.3 88.2
BVPS 168.1 178.9 223.6 276.6
FCF 21.5 1.9 5.2 36.3
DPS 15.0 17.8 21.5 26.0
Return Ratio(%)
RoCE 41.8 35.8 34.3 35.6
ROIC 39.2 37.1 39.5 43.5
RoE 30.9 33.9 32.8 31.6
Balance Sheet
Net Debt : Equity (x) (0.4) (0.4) (0.5) (0.5)
Net Working Capital (Days) 1 2 3 3
Valuation(x)
PER 68.4 54.3 48.3 40.5
P/B 19.0 17.9 14.3 11.6
P/CEPS 61.1 48.6 43.0 36.2
EV/EBITDA 45.1 42.0 35.4 29.4
EV/Sales 7.2 6.6 5.8 5.0
Dividend Yield (%) 0.5 0.6 0.7 0.8
Source: Company Data, PL Research
Britannia Industries
November 15, 2019 7
Price Chart Recommendation History
No. Date Rating TP (Rs.) Share Price (Rs.)
1 03-Oct-19 Accumulate 3,307 2,903
2 09-Aug-19 Accumulate 3,068 2,602
3 04-Jul-19 Accumulate 3,145 2,841
4 02-May-19 Accumulate 3,145 2,783
5 05-Apr-19 Accumulate 3,142 2,994
6 11-Feb-19 Accumulate 3,159 3,108
7 07-Jan-19 Accumulate 3,231 3,144
Analyst Coverage Universe
Sr. No. Company Name Rating TP (Rs) Share Price (Rs)
1 Asian Paints Accumulate 1,855 1,767
2 Avenue Supermarts Reduce 1,647 1,843
3 Britannia Industries Accumulate 3,307 2,903
4 Colgate Palmolive Reduce 1,267 1,564
5 Crompton Greaves Consumer Electricals BUY 303 255
6 Dabur India Hold 484 481
7 Emami Accumulate 373 327
8 Future Retail BUY 477 381
9 GlaxoSmithKline Consumer Healthcare Hold 9,144 8,960
10 Havells India Reduce 580 670
11 Hindustan Unilever Accumulate 2,083 2,009
12 ITC BUY 344 249
13 Jubilant FoodWorks BUY 1,753 1,435
14 Kansai Nerolac Paints Accumulate 548 539
15 Marico Reduce 339 394
16 Nestle India Reduce 12,093 14,490
17 Pidilite Industries Hold 1,365 1,344
18 Titan Company Hold 1,189 1,282
19 Voltas Hold 662 667
PL’s Recommendation Nomenclature (Absolute Performance)
Buy : > 15%
Accumulate : 5% to 15%
Hold : +5% to -5%
Reduce : -5% to -15%
Sell : < -15%
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly
1404
1921
2439
2957
3475
Nov -
16
May -
17
Nov -
17
May -
18
Nov -
18
May -
19
Nov -
19
(Rs)
Britannia Industries
November 15, 2019 8
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We/I, Mr. Amnish Aggarwal- MBA, CFA, Mr. Darsh Gada- MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
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