Buy Britannia Industries; target of Rs 4200: Sharekhan

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Sharekhan's research report on Britannia Industries

Britannia Industries (Britannia) volumes grew by 4-5% lower than ours as well the street’s expectation of 7-8%. General trade and rural markets are growing above pre-COVID levels; urban towns and alternate channels (including modern; institutional) are yet to recover. Adjacent products continue to perform well with rusk, cheese registering strong double-digit growth of 14%; lower milk prices helped dairy segment’s profitability to improve to 22% (OP stood at 19.3%). New launches, recovery in alternate channels, sustained strong growth in the Hindi-speaking belts and better performance of adjacencies would drive revenue growth ahead. Input cost inflation (largely palm oil) will be mitigate with efficiencies (focus on maintaining OPM at existing levels).

Outlook

Stock trades at 41.4x/35.7x FY2022/23E EPS; with focus on becoming a large snacking company and driving up OPMs; we maintain our Buy with an unchanged PT of Rs. 4,200.

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