Britannia to hit Rs 1000 on good growth prospects: Shah

Rajen Shah of Angel Broking told CNBC-TV18, "Britannia Industries reported reasonably fine numbers with a 12 percent growth in topline and about 30 percent growth in bottomline. It surged about 18 percent over the past two sessions, but this is just the beginning. We see a very strong upside, almost of about 50 percent over the next 18 months."

He further added, "We have a target of about Rs 1,000 for Britannia by December 2014. The reason is a complete facelift of Britannia on cards. Currently, almost 75 percent of its revenue comes from the biscuit business; hence it is called a biscuit company. But over the next four-five years, this company will be called a complete food company, Nusli Wadia has taken steps in this direction. Varun Berry has been promoted as the head of Indian operations. Earlier, he had been with Pepsi for about 18 months and with his last assignment as the CEO of Pepsi."
"Pepsi has been aggressively launching and marketing its products. So, the success of Pepsi would be replicated here in Britannia over the next three-five years and that will completely re-rate the Britannia stock which has been underperforming over the past three-four years."
He also said, "If you see other FMCG companies or food companies, like Nestle, which will report about Rs 10,000 crore of top line this year. It is trading at a market cap of Rs 50,000 crore, so it is trading at five times the sales. Also, if you see any FMCG company whether it is Hindustan Unilever which reported about Rs 26,000-27,000 crore of topline and is trading at about Rs 1,25,000 crore of market cap, five times the sales. Jubilant is again trading at Rs 1,400 crore of top line sales, Rs 7,000 crore of market cap, five times the sales."
"Even international companies like Pepsi that are growing at about hardly three percent, Pepsi this year would be growing at about 2-3 percent. So USD 65 billion is the revenue, market cap is about Rs 130 billion so it is at two times the sales. Company which is hardly growing at 2-3 percent is trading at two times the sales."
"Even Mondelez International which was formed from the demerger of Kraft Foods, for the last two years, has not been growing and this year it would report stagnant USD 35-36 billion of sales and is trading at a market cap of about USD 55 billion so it is at about 1.7 times the sales. So, Britannia re-rating is on the cards because this company will be growing by at least 15 percent," Rajen Shah said.
He further added, "A company which grows at 15 percent deserves 2.5 times sales. Currently, if you see Britannia's revenue this year, it would be about Rs 7,000 crore which we were expecting for FY14 and the market cap is Rs 8,200 crore, hardly 1.2 times the sales. So, on that parameter as well as on the growth opportunity which we foresee for Britannia, it's a strong upside for Britannia with a target of Rs 1,000 in about 18 months from now."