Buy Britannia Industries; target of Rs 515: KRChoksey

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Buy Britannia Industries; target of Rs 515: KRChoksey

KRChoksey is bullish on Britannia Industries and has recommended buy rating on the stock with a target of Rs 515 in its August 18, 2011 research report.

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KRChoksey is bullish on Britannia Industries and has recommended buy rating on the stock with a target of Rs 515 in its August 18, 2011 research report.

"Britannia Industries Ltd. reported robust topline growth of 21.4% y-o-y to Rs 1106.3 crores on account of volume growth (12-13%) & price growth of (6-8%). EBITDA grew 23.8% y-o-y to Rs 50.6 crores. Despite price hikes, margin expansion was limited at 9 bps y-o-y on account of high raw material prices. Net profit grew by 27.3% y-o-y to Rs 41.8 crores on the back of strong operational performance & higher other income, partially impacted by higher effective tax rate."

"Britannia Industries Net sales improved by 21.4% y-o-y to Rs 1106.3 crores on account of healthy mix of volume(12-13%) & price growth(7-8%).Consolidated revenues increased by 21% y-o-y. The non biscuit segment with a size of 900 crores has shown robust growth & has more than doubled in last 5 years. We expect Britannia's revenue to grow at a healthy CAGR of 17% over FY11-13E on account of double digit volume growth, continuous innovations, increased penetration & judicious price hikes. Britannia's EBITDA grew by 23.8% yo- y to Rs 50.6 crores. The company took price hikes of 6-8%; however the significant increase in raw material costs curtailed the gross margin expansion to 11 bps y-o-y. Out of its key raw materials, wheat & Sugar have remained stable in Q1 but SMP, refined palm oil & Cashew have increased significantly by 24%, 35% & 74% respectively. Net Profit improved by 27.3% y-o-y to Rs 41.8 crores on account of strong operational performance & 31% y-o-y increase in other income (includes profit on sale of property)."

"Britannia industries continue to report healthy topline growth driven by product mix, healthy volumes & judicious price hike. With improvement in product mix(led by innovations & decrease in proportion of Glucose in the overall biscuit segment),stepping up of cost cutting initiatives across the value chain, leveraging the synergies across segments & judicious price hikes we expect margins to improve going forward. We expect Britannia's Revenue & EPS to grow at healthy CAGR of 17% and 39% respectively over FY11-13E.At CMP of Rs 466, the stock is trading at 25.5x FY12E EPS of Rs 18.3 & 19.9x FY13E EPS of Rs 23.4.We recommend a HOLD on the stock with a target of Rs 515, based on 22x FY13E EPS of Rs 23.4, giving an upside potential of 11%," says KRChoksey research report.

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To read the full report click on the attachment