Emkay Global Financial's report on Britannia Industries
Beating estimates, Britannia reported a strong quarter, with 26% growth in sales and 110% in PAT. Volumes grew 22% and operating margin expanded 640bps led by a better mix, efficiency gains and reduced ad spends, boosting PAT – 36% above estimates. BRIT remains the biggest beneficiary of increased in-home consumption (as highlighted in Keep Munching) and offers strongest growth outlook. Continuing growth momentum in core portfolio is positive and we believe that the strong opportunity to scale up adjacencies can further improve growth outlook. While some of the margin gains may be temporary, softer input prices, savings in discretionary spends and stronger growth can still offer a solid margin expansion ahead. We factor in a ~200bps margin gain for quarters ahead, driving 290bps expansion in FY21.
Outlook
BRIT remains our high conviction Buy. We increase FY21-23 estimates again by 11-17% and TP to Rs4,500 (from Rs3,960), rolling forward to Sept-22 EPS. Valuations at 42x FY22 EPS are still attractive given further upsides to earnings.
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