Buy Britannia; target of Rs 504: Firstcall Research

“Britannia Industries Limited is an Indian company based in Kolkata that is famous for its Britannia and Tiger brands of biscuit, which are popular throughout the country. Britannia has an estimated 38% market share. The Company's principal activity is the manufacture and sale of biscuits, bread, rusk, cakes and dairy products. In 1892, Britannia started in a nondescript house in Kolkata) with an initial investment of Rs. 295. By 1910, with the advent of electricity, mechanized its operations, and in 1921, it became the first company east of the Suez Canal to use imported gas ovens. In 1975, the Britannia Biscuit Company took over the distribution of biscuits from Parry's who till now distributed Britannia biscuits in India. In the subsequent public issue of 1978, Indian shareholding crossed 60%, firmly establishing the Indian’s of the firm. The following year, Britannia Biscuit Company was re-christened Britannia Industries Limited (BIL). Four years later in 1983, it crossed the Rs. 100 crores revenue mark.”

“In 1992, it celebrated its Platinum Jubilee. In 1997, the company unveiled its new corporate identity - "Eat Healthy, Think Better" - and made its first foray into the dairy products market. In 1999, the "Britannia Khao, World Cup Jao" promotion further fortified the affinity consumers had with 'Brand Britannia'. Britannia strode into the 21st Century as one of India's biggest brands and the preeminent food brand of the country. In recognition of its vision and accelerating graph, Forbes Global rated Britannia 'One amongst the Top 200 Small Companies of the World', and The Economic Times pegged Britannia India's 2nd Most Trusted Brand. The brand Britannia is the trust of almost one-third of India's one billion populations and a strong management at the helm on its path of innovation and quality.”

“Britannia Industries has posted net profit of Rs 378.50 million for the quarter ended Sept 30, 2011 as compared to Rs 318.30 million for the quarter ended Sept 30, 2010, representing rise of 18.76%. Net sales surged by 18.05% to Rs.12956.80 million from Rs.10975.30 million as compared to same quarter last year. Total income has increased from Rs 13051.80 million for the quarter ended Sept 30, 2010 to Rs 11072.40 million for the quarter ended Sept 30, 2011, representing increase of 17.88%. The EPS of the company is stood at Rs.15.84 for each share for the quarter ended Sept 2011.”

“At the current market price of Rs.446.25, the stock is trading at 31.38 x FY12E and 27.30 x FY13E respectively. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.14.22 and Rs.16.35 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 20% and 19% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 16.71 x for FY12E and 14.81 x for FY13E. Price to Book Value of the stock is expected to be at 8.58 x and 6.53 x respectively for FY12E and FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 504 for medium term investment,” says Firstcall Research report.

Public holding more than 90% in Indian cos

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