MOSL: BRITANNIA INDUSTRIES (Buy)-Robust launch pipeline boosts growth prospects
Britannia Industries: Robust launch pipeline boosts growth prospects; maintain Buy
(BRIT IN, Mkt Cap USD10.8b, CMP INR6200, TP INR7165, 16% Upside, Buy)
- BRIT's consol. sales increased 12.4% YoY to INR25.4b (our estimate: INR27.6b) in 1QFY19. We expect base business volume growth to be around 11% (press release states double-digit volume growth; our estimate: +15%).
- gross margin expanded by 130bp YoY (in-line) to 40%. Higher other expenses (up 30bp YoY to 20.4% of sales) and staff costs (up 20bp YoY to 4.3%) restricted EBITDA margin expansion to 80bp YoY to 15.3% (our estimate: 16%). Management attributed the operating margin expansion to benign raw material, its cost-efficiency program and efforts to leverage fixed costs.
- EBITDA grew 18.5% YoY (our estimate: +34.6%) to INR3.9b (our estimate: INR4.4b), while consol. PAT increased 19.5% YoY to INR2.6b (our estimate: INR2.9b).
- Analyst meet highlights: (1) More innovation to be seen in adjacencies in FY19 compared to the past 10 years. (2) It plans to re-launch all key biscuit brands in FY19 with all-new packaging/product change. (3) Some commodity cost inflation was observed in wheat due to MSP hike. The company, however, is covered till January. If needed, it will take price increase of 4-5% in 4QFY19.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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