Britannia has delivered a steady volume growth of 8.0% in the Q1FY17 under sluggish demand scenario, when compared to 10.0% volume growth in Q1FY16. The company has reported total income from operations at Rs.21966 Mn during this quarter, posting YoY growth of 9.1% when compared to Rs.20139 Mn in Q1FY16 on the back of double digit growth in West and North of India. The company’s EBITDA margin improved by 113 bps to reach 14.4% on the back of operational efficiencies during the quarter compared with 13.3% during Q4FY16. Britannia has planned to enhance its profitability, on the back of cost efficiencies programs, by 2.0% and now the company is planning to increase its profitability by 2.7% vis-a-vis erstwhile plan of 2.0%. EBITDA registered 9.7% growth YoY and improved from Rs.2883 Mn during Q1FY16 of FY16 to Rs.3162 Mn during Q1FY17. The company managed to post 10.0% PAT margins during the quarter and PAT has been increased from Rs.1945 Mn during Q1FY16 to Rs.2205 Mn during this quarter registering growth of 13.4% YoY. Growth prospects are expected on the back of good monsoon during the year and along with the seventh pay commission coming in.
Valuation and Outlook: Karvy have introduced FY18E estimates. Britannia, with its improving operational efficiencies and aggressive expansion strategies in its distribution in terms of direct and indirect reach, is moving up the value chain and capturing more market share.They have revised our revenue growth expectations to 12.6% from 13.9% and EBITDA margins were adjusted to 14.0% from 15.0% due to increase in the prices of key raw material during FY17E. At CMP of Rs.3489 per share, the stock is trading at 37.6x FY18E EPS. They value the company at 40.0x and arrive at upwardly revised target price of Rs.3707 with a potential upside of 6% with “HOLD” rating.