KR Choksey recommended buy rating on Britannia Industries with a target price of Rs 4531 in its research report dated August 09, 2017.
KR Choksey's research report on Britannia Industries
Britannia Industries Ltd posted its Q1FY18 results which were in-line with our estimates and Consolidated Net revenue reported at INR 23,398.1Mn which showed growth of 6.5% yoy and 1.0% qoq. EBIDTA margins during the quarter improved qoq by 74 bps qoq while saw a decline of 35bps yoy. EBIDTA margins stood at 14.0% with EBIDTA at INR 3,285.1 Mn. PAT after exceptional item for Q1FY18 stood at INR 2,159.7Mn with improvement in PAT margin qoq by 13bps and decline by 75 bps yoy with margins at 9.2%.
Britannia industries remain one of the largest FMCG player with its major presence in biscuits segment. Britannia has posted better results in Q1FY18 but still it faced challenging environment ahead of GST implementation. We believe that with management focus on growing its portfolio with new innovative products in premium segment, capturing new markets and geography, increasing reach in distribution channel, focus to increase penetration in rural areas, untapped opportunities in the domestic and international market, etc will help it to grow faster in the market. We expect its revenue growth to be around 10-12% FY18E-FY19E. With Britannia's move to mitigate inflation of raw material price we anticipate improvement in margins, i.e. EBIDTA to 14.5% and PAT to 9.9% in FY19E. At CMP of INR 4,061, we recommend “ACCUMULATE” rating on the stock with a target of INR 4,531 with a potential upside of 11.6%.
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