Edelweiss recommended buy rating on Britannia Industries with a target price of Rs 4300 in its research report dated August 09, 2017.
Edelweiss' research report on Britannia Industries
Britannia Industries’ (Britannia) revenue growth and PAT decline of 5.7% YoY and 1.4% YoY, respectively, came in line, while 3.9% YoY EBITDA spurt was slightly ahead of estimate aided by ad spend rationalisation. Despite trade channel disruptions, domestic volumes grew 3% YoY (on strong base of 8%) and overall volumes rose 2.5% YoY. Amidst raw material inflationary pressure (up 6% YoY), gross margins tumbled 121bps YoY, partially insulated by timely price hikes. Britannia’s sustained focus on enhancing direct reach coupled with rural focus has helped it gain market share. Entry in new categories and pickup in demand are also likely to benefit the company. Maintain ‘BUY’.
Strong product pipeline, entry in new categories and deepening penetration are likely to help Britannia outperform industry. Its strategy to enhance direct distribution coupled with rural push is likely to drive growth and sustain MS gains. Hence, we revise up our target FY19 PE multiple to 42x (from 38x) and revise up target price to INR 4,300 (earlier INR 3,775). The stock is trading at 39.6x FY19E EPS. We maintain ‘BUY/SO’.
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