MOSL: BRITANNIA INDUSTRIES (Buy)-Industry slowdown leads to earnings cut; ICD reduction a significant positive
BRITANNIA INDUSTRIES: Industry slowdown leads to earnings cut; ICD reduction a significant positive
(BRIT IN, Mkt Cap USD8.8b, CMP INR2587, TP INR3030, 17% Upside, Buy)
- Consolidated sales increased 6.2% YoY to INR27b (v/s est. of INR28b). Standalone sales grew 7.2% YoY to INR25.8b with 3% volume growth in base business (v/s est. of +6%). Consol. EBITDA grew 1.4% YoY to INR3.9b (v/s est. of INR4.3b), while consol. PAT grew 2.4% YoY to INR2.6b (v/s est. of INR2.9b).
- gross margin expanded 40bp YoY to 40.4%. Higher other expenses as % of sales (up 90bp YoY to 21.3%) and increase in staff costs as % of sales (up 20bp YoY to 4.5%), meant that EBITDA margin contracted 70bp YoY to 14.6% (down 100bp QoQ) v/s est. of 15.5%. Adspends (not disclosed separately in financials) were reportedly high due to campaign during the Cricket World Cup.
- Conference call highlights: (1) Market is growing at a very slow pace but BRIT is significantly outpacing the market, (2) ICDs are reduced to under INR5b as of 1QFY20 (INR7b in March) and are expected to decline by another INR1.5b.
Britannia Industries is a food-products corporation based in India. Co.'s principal activity is the manufacture and sale of biscuits, bread, rusk, cakes and dairy products. Co. manufactures and distributes products such as biscuits, high protein foods for children as well as digestive-aided ingredients for older adults, convenience foods such as powdered dairy creamers, breads, cookies, snack-cakes and rusk, crackers, cheese, marine products and other related food products. Co.'s brand of products include Tiger, Mariegold, Treat, 50-50, Good Day, Milk Bikis, Little Hearts, Pure Magic, NutriChoice Bread and Milkman.
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