Sharekhan's research report on Britannia Industries
Britannia Industries’ (Britannia’s) underperformance versus broader indices (13% absolute return vs. Nifty return of 34% and Nifty consumption of 26%) in the past one year; leadership position in biscuits category and steady earning visibility make it a better pick in the consumer goods space. Market share gains in biscuits category, strong growth in Hindi-speaking belt, product innovation and a wider distribution network will be key growth drivers in the near to medium term. Strong traction in adjacencies will add to overall revenue growth in near future. Focus on cost-savings helped OPM improve to 16% in FY2020 from 9% in FY2014; going ahead efficiencies, cost saving measures and premiumisation would help OPM to improve to ~20% by FY2023E.
Stock trades at 35x its FY2023E EPS, at a discount to some large consumer goods stocks. Current underperformance provides good entry point; we recommend Buy with an unchanged price target of Rs. 4,200.
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