MOSL: BRITANNIA INDUSTRIES (Buy)-Best-of-breed earnings growth visibility commands premium multiples
​Britannia Industries: Best-of-breed earnings growth visibility commands premium multiples
(BRIT IN, Mkt Cap USD7.6b, CMP INR4061, TP INR4660, 15% Upside, Buy)
- BRIT's consolidated sales grew 6% YoY (est. of +4%) in 1QFY18. Standalone (S/A) sales increased 6.6% YoY, but subsidiary sales were down 5.9% YoY. We expect base business volume growth to have come in at ~2%, as against our estimate of flat volumes. This is on a base of 10% volume growth in 1QFY17.
- Consol. gross margin contracted 120bp YoY (est. of -100bp) to 37.6% due to commodity cost inflation (at 6% in 1QFY18). EBITDA margin shrunk 40bp YoY to 13% (est. of 12.4%) in 1QFY18. EBITDA grew 2.8% YoY (est. of -3.8%) to INR2.9b. Higher tax rate at 34.4% (est. 32%) led to adj. PAT decline of 1.5% YoY (est. of - 2.4%) to INR2.2b.
- Concall highlights: (1) Cost-efficiency program target is 60% higher than FY17 levels (earlier target: 40%) - 1QFY18 performance was in line toward achieving this target. Savings were INR1.5m in FY17; INR2.5b of savings in FY18E would be 2.4% of consol. sales for the year. (2) BRIT gained market share in a difficult quarter from national players and small players. Due to stringent compliance under GST regime, it expects more market share gain from small players. (3) Direct reach is likely to see addition of 0.2-0.25m every year (stood at 1.56m at end-FY17), which is impressive, especially when compared to peers.
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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