MOSL: BRITANNIA INDUSTRIES (Buy)-Robust volume and margin outlook
Britannia Industries: Robust volume and margin outlook; Maintain Buy
(BRIT IN, Mkt Cap USD10.2b, CMP INR5469, TP INR6400, 17% Upside, Buy)
- BRIT reported 13.1% consol. sales growth to INR25.4b (est. of INR25.8b) in 4QFY18. We expect base business volume growth to have come in at ~11% (press release states double-digit volume growth; our estimate was 12%).
- gross margin expanded 50bp YoY (in-line) to 38.5%. EBITDA margin expanded 190bp YoY to 15.6% (est. of 15.4%). Apart from gross margin improvement, there was a decrease in other expenses (-170bp YoY to 18.6%) while staff cost to sales rose 30bp YoY to 4.3%. Cons. EBITDA, thus, grew at a healthy 28.9% YoY (est. of +29.3%) to INR4.0b (est. of INR4.0b). PAT growth was a healthy 25.2% YoY (to INR2.64b v/s est. of INR2.7b).
- FY18 performance: Sales, EBITDA and PAT grew 9.8%, 20.4% and 13.5% growth, respectively.
- Concall highlights: (1) Inter corporate deposit to group companies was INR3.5b in FY18 v/s INR4.5b in FY17. (2) INR2.25b cost savings in FY18 (4.5x that of FY14); targeting savings of ~INR2.4b in FY19. (3) Direct reach stands at 1.9m outlets. Total reach is ~5m outlets.
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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