Add Britannia Industries in portfolio: Sandeep Singal

One can add Britannia Industries in portfolio, says Sandeep Singal of Emkay Global Financial Services.

Singal told CNBC-TV18, "Consumer goods are classic defensives no doubt but what we are recommending that in the regime of falling consumable income and first it affected discretionary spending now it is affecting staples. We saw like volume degrowth first time in Hindustan Unilever Ltd (HUL). So what we are clearly saying is look at stocks, which are price makers, which have large market share stock like Asian Paints, Berger Paints who have seen if you see over the last five years, their volumes have virtually become half but their earnings have not. Typically because in history never ever they have reduced prices and when they get advantage of falling commodity prices, those are input prices for them, they do not pass on to consumer because they have significant market share and they are price-makers. So, there we are saying, okay, you align your portfolio to what Asian Paints, Berger Paints instead stocks like HUL which might be price taker and their gross margins and profit after tax (PAT) margins would affect by a percentage or two and earnings might degrow."
"We are preferring Britannia Industries where because of the sheer premierisation, the whole biscuit space which used to be like treated as EBITDA per tonne kind of a thing and did not have that pricing power. Now because of the premierisation they are clearly missing out a brand in the form of Good Day, Nutricare etc. We are saying this stock could give a good return because it looks cheap when you compare it with its marketcap to sell. It is just 1.2 as against 2 as a ratio for other equally sized companies in the same space. So, this is the stock that we are recommending to our clients to add to their portfolio."