MOSL: BRITANNIA | Annual Report Update: Expanding distribution reach, a key entry barrier

bRITANNIA | Annual Report Update: Expanding distribution reach, a key entry barrier; ‘Audacious, ambitious and consistent’ pipeline to boost growth

(BRIT IN,Mkt Cap USD11.2b, CMP INR6434, TP INR7300, 15% Upside, Buy)

We went through BRIT’s FY18 annual report. Our key takeaways:

• BRIT ended FY18 with 9.5% sales growth, 17.5% EBITDA growth, and 13.6% adjusted PAT growth. Gross margin expanded 10bp to 38.4% and EBITDA margin expanded 100bp to 15.1%.
• Consolidated ad spends (not disclosed on quarterly basis) grew 6.8% to INR4.1b; however, as a percentage of sales, ad spends declined 10bp to 4.1%.
• BRIT’s distribution expansion has resulted in a reach of 5.2m outlets across the country, with direct reach of 1.84m outlets. This should fuel strong growth.
• The INR320b biscuit market in India is projected to grow at a CAGR of 11.3% in value terms during 2018-2022.
• BRIT reaches 180m households in India. 70% of Indian households (80% in urban India and 90% in the metros) consume BRIT’s products. The potential for premiumization is huge.
• Success of innovation has fueled an appetite to develop – in the management’s own words – “an audacious, ambitious and consistent pipeline.”