Britannia Industries Ltd. share price target

We have marginally tweaked our estimates for FY21/22 given the modest growth commentary. Retain BUY with revised TP of Rs. 4,170 (Rs. 4,300 earlier) as we value the stock at 50x its FY22E EPS.

Britannia (BRIT) 2QFY21 result was in-line with our estimates. Revenue growth subsided to 12%YoY (vs 27% in 1QFY21) with gradual opening up of the economy and pick-up in out-of-home consumption. Non-biscuit portfolio outperformed biscuit portfolio in volume growth. Modern trade channel continues to face growth headwinds. However, deflationary raw material cost aided significant improvement in operating profit margins. Positively, BRIT plans for both green field (in Tamil Nadu, UP and Bihar) and brownfield (Odisha and Ranjangaon) expansion to enhance overall capacity. This will help in margin improvements. We have introduced FY23E estimates...

Consolidated revenue from operations stood at Rs 3,420.67 crore in Q1 June 2020, rising 27% from Rs 2700 crore in the same period last year. Profit before tax (PBT) jumped 88% year-onyear to Rs 737 crore in Q1 June 2020. Total tax expense surged 36% to Rs 194.37 crore in Q1 June 2020 over Q1 June 2019 and PAT grew by 118% to Rs.543 crore. Profit of the company more than doubled and its margin expanded as the fast-moving consumer goods maker cut...

Strong increase in revenue driven by volume growth In Q1FY21, Britannia achieved one of the strongest growth in topline of 26.4% YoY (of which ~21.5% was attributable to volume growth and ~5% due to favorable mix and pricing) to reach Rs. 3,384cr. Direct reach outlets during the quarter rose to 21.5 lacs (vs. 19.7 lacs in Q4FY20). The company's continued focus on rural sales (~37% of total revenue) led to robust increase in Rural Preferred Dealers (RPDs) to 22k (vs. 19k in Q4FY20). Amongst other channels, Modern trade remained subdued as many stores remained shut down due to COVID-19, alternate channels such as institutional...

BRIT's reported a blockbuster performance for Q1FY21 beating our and consensus estimates by a healthy margin on all key metrics. Reported Revenue growth of 26.5% was driven by a strong 21.5% volume growth and 2.5% each price mix and ASP increases) to Rs. 3,385cr (Rs. 3,276cr our estimates).

(%) Margins (%) Britannia Industries (BRIT) has been aided by a confluence of positive factors, such as high in-home consumption (biscuits constitute 82% of sales), reduction in ad spend, decline in material cost, and low promotional spend (owing to strong demand). However, this extraordinary earnings growth in FY21 presents a significant hurdle from an FY22/FY23 perspective as none of these factors present a structural positive. Furthermore, material costs could result in high volatility in earnings for BRIT it has one of the lowest gross margins among peers (40% in FY20). While we like the structural story, expensive valuations (47.5x FY22), sustained concerns of elevated group inter-corporate deposits (ICDs) at around INR6b (similar to 4QFY20 when they crossed their own stated threshold of INR5b), and an uncertain earnings outlook beyond FY21 have led us to maintain our rating. Standalone sales grew 24.8% YoY to INR32.3b.