Prabhudas Lilladher recommended accumulate rating on Britannia Industries with a target price of Rs 3159 in its research report dated February 11, 2019.
Prabhudas Lilladher's research report on Britannia Industries
Britannia is entering a new phase of growth powered by innovations and renovations like 1) Whole Wheat Vita Marie Gold, Goodday Cashew Almond, re-launches in 50-50 & Tiger Creams 2) significant revamp of cakes portfolio with entry in Brownie, Swiss Rolls and layered cakes under treat brand 3) PAN India launch of Treat cream wafers 4) success of Winky Cow milk shakes and 5) planned launch of Treat croissants in 4Q. although 3Q volume growth at 7% disappointed, we expect acceleration backed by expected surge in rural demand post interim budget and sustained levers of direct distribution expansion (0.25m addition/year) and higher growth in Hindi heartland. BRIT expects Input cost inflation of 4-5% in FY20 which is expected to be mitigated by 3-4% price increases and benefits of cost efficiency programs (Rs2.25bn in FY18 and FY19).
We estimate 18.5% PAT CAGR over FY19-21 and value the stock at 46xFY21 EPS given robust growth outlook and strong innovation pipeline and arrive at a SOTP based target price of Rs3159. Retain Accumulate for long term gains.
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