Sharekhan's research report on Britannia Industries
Negative working capital and higher profitability helped generate operating cash flows of Rs. 5,740 crore over FY18-21. Britannia has steadily expanded capacity (at a capex of Rs. 240-400 crore p.a.) and rewarded shareholders with high dividend pay-out over the last two years. Inter-corporate deposits to group companies (key overhangs for the stock) stood at Rs. 790 crore in FY2021, which reduced to Rs. 470 crore in Q1FY2022. Sustained innovation, investing in the front-end and back-end for growth of key categories, a product portfolio that straddles the pyramid and distribution expansion remain key growth levers. Driving efficiencies through supply chain management and higher in-house products would lead to sustained margin expansion.
Outlook
We maintain a Buy on Britannia Industries with a revised price target of Rs. 4,740. Stock trades at 43.5x/37.6x its FY2023/24E EPS, at a discount to larger peers.
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