Buy Britannia Industries; target of Rs 584: Angel Broking

“For 1QFY2013, Britannia Industries (Britannia) posted a moderate top-line growth of 10.8% yoy to Rs1,222cr (Rs1,103cr in 1QFY2012). The adjusted profit registered a robust 38.7% yoy growth to Rs43cr (Rs31cr in 1QFY2012).”

“Britannia’s top-line grew by 10.8% yoy on account of ~4% volume growth and the remaining ~7% growth accounted by price hikes. The company registered a 104bp yoy expansion in its OPM to 5.3% led by a 379bp yoy gross margin expansion to 37.9%, as prices of major raw materials such as wheat and skimmed milk products declined. Consequently, adjusted profit grew by 38.7% yoy to Rs43cr. However, the company registered a mere 4.1% yoy increase in its reported profit on account of a higher base in 1QFY2012 as it included a profit on sale of property (post-tax) of ~Rs10cr. During the quarter, Britannia launched Bourbon Capuccino, Pure Magic Praline and a new range of creamy flavors for Treat.”

“We expect Britannia to post ~17% revenue CAGR over FY201214E and model in margin expansion of 85bp, despite sustained higher ad spends due to the benign input cost environment. Further, in terms of earnings, we expect Britannia to post a robust ~27% CAGR. At the current market price, the stock is trading at 18.3x FY2014 EPS; hence, we recommend Buy on the stock with a target price of Rs584, based on 23x FY2014E EPS,” says Angel Broking research report.   

FIIs holding more than 30% in Indian cos

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