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 USD8.9b, CMP INR4741, TP INR5845, 23% Upside, Buy)
- BRIT reported 7.4% YoY consolidated sales growth in 2QFY18. Standalone sales too were up by 7.8% YoY. This implies that subsidiary sales grew decently by 1.8% YoY, despite a difficult operating environment in the Middle East. Base business volume growth is expected to be ~5% (press release states mid-single-digit volume growth), as against our estimate of 6% growth. Management stated that trade channels have normalized post GST and that they are seeing improving consumer offtake.
- Consolidated gross margin expanded 70bp YoY (est. flat) to 37.6%. Management mentioned that prices of key raw materials were stable in 2QFY18. EBITDA margin expanded 130bp YoY to 14.5% (est. of 15.3%).
- Concall highlights: (1) Cost-efficiency programs will generate savings of INR2.5b in FY18 (FY17: INR1.5b); 40% of the yearly target achieved in 1HFY18. Focus will be on distance reduction, which is currently at 400km and expected to reduce further by 25% over 2-3 years. Wastage reduction is another area of cost saving. Network optimization will be done under the GST regime over next 2-3 years. Also, it is negotiating with vendors that have got low rates of GST. (2) Gained 170bp market share in weak states in central India. Market shares are still in early teens in these states. (3) Direct reach is 1.8m outlets.Â
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.