MOSL: BRITANNIA INDUSTRIES (Buy)-Volumes up in double-digits-Margins surprise positively
Britannia Industries: Volumes up in double-digits; Margins surprise positively
(BRIT IN, Mkt Cap USD8.9b, CMP INR4759, TP INR5995, 26% Upside, Buy)
- BRIT’s consol. sales grew 13% YoY to INR25.6b in 3QFY18, exactly in line with our estimate. We assume base business volume growth of ~11% (company press release states double-digit volume growth), in line with our estimate. EBITDA, thus, grew by a healthy 31% YoY (est. of +26%) to INR3.9b (est. of INR3.7b). Consol. PAT growth – albeit healthy at 19.6% YoY to INR2.64b (est. of INR2.67b) – did not grow at the same pace as EBITDA.
- gross margin expanded 110bp YoY (est. of +100bp) to 38.5%. EBITDA margin expanded 210bp YoY to 15.2% (est. of 14.5%). Apart from gross margin improvement, there was a decrease in other expenses (-80bp YoY to 19.6%) and staff costs (-20bp YoY to 3.7%).
- Concall highlights: (1) Gaining share at the cost of both second and third largest players, and also smaller players. (2) Cost savings in FY18 stood at INR2.3b – 4.5x that of FY14 levels – slightly lower than the INR2.5b guided at the beginning of the year, but still remarkable. FY19 target not stated, but BRIT said it will be higher than FY18 levels. (3) Direct reach at 1.75m 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.
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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