Buy Britannia Industries; target of Rs 4200: Sharekhan

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Sharekhan's research repor on Britannia Industries

Domestic sales volume grew by 9% in Q2FY2021, lower than ours as well as the street’s expectation of 12-13%; August volume growth stood at low single-digits but improved close to double digits in September. Adjacencies continue to perform well with rusk and cheese clocking strong double-digit growth; lower milk prices aided good profitability of dairy segment. Product launches, capacity additions in key states, improving penetration in regional markets and sustained growth in adjacencies will be key revenue growth drivers in the near term. Input cost inflation is expected to be marginal.

Outlook

The stock is trading at 42x/36x FY2022/23E EPS; given its focus on becoming a large snacking company and sustained OPM expansion, we maintain a Buy rating with an unchanged PT of Rs. 4,200.

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