MOSL: Morning India (25/July/18): 1. Britannia Inds (AR); 2. Asian Paints; 3. ICICI Pru Life; 4. United Spirits; 5. GSK Pharma; 6.Info Edge; 7. Hexaware Tech; 8. Delta Corp; 9. Team Lease
MOrning India (25/July/18): 1. Britannia Inds (AR); 2. Asian Paints; 3. ICICI Pru Life; 4. United Spirits; 5. GSK Pharma; 6.Info Edge; 7. Hexaware Tech; 8. Delta Corp; 9. Team Lease; 10. Music Broadcast
Today’s top research idea
Britannia: Expanding distribution reach, a key entry barrier; ‘Audacious, ambitious and consistent’ pipeline to boost growth
We went through BRIT's FY18 annual report. Our key takeaways:
- BRIT ended FY18 with 9.5% sales growth, 17.5% EBITDA growth, and 13.6% adjusted PAT growth. Gross margin expanded 10bp to 38.4% and EBITDA margin expanded 100bp to 15.1%.
- Consolidated ad spends (not disclosed on quarterly basis) grew 6.8% to INR4.1b; however, as a percentage of sales, ad spends declined 10bp to 4.1%.
- BRIT's distribution expansion has resulted in a reach of 5.2m outlets across the country, with direct reach of 1.84m outlets. This should fuel strong growth.
- The INR320b biscuit market in India is projected to grow at a CAGR of 11.3% in value terms during 2018-2022.
- BRIT reaches 180m households in India. 70% of Indian households (80% in urban India and 90% in the metros) consume BRIT's products. The potential for premiumization is huge.
- Success of innovation has fueled an appetite to develop - in the management's own words - "an audacious, ambitious and consistent pipeline."
- We retain Buy with a target price of INR7,300 (51x June 2020E EPS; 20% premium to three-year average due to improving visibility on both volume recovery and margin growth).
Piping hot news
Govt plans to sell 5% in BEL; may fetch Rs 1,300 crore
- The government is planning to sell 5 per cent stake in Bharat Electronics Ltd (BEL) through offer for sale, which could fetch about Rs 1,300 crore to the exchequer. The government currently holds 66.79 per cent in the defence PSU. The government has invited bids from merchant bankers by August 14.
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