Buy Britannia Industries; target of Rs 5500: Sharekhan

Sharekhan's research report on Britannia Industries

Q4FY23 numbers of Britannia Industries (Britannia) were excellent with revenue growing by 13%, while gross margins and OPM expanded by 688 bps and 442 bps y-o-y respectively, to 44.9% and 19.9% (beating our as well street expectation of ~17-17.5%).. Biscuit volume growth would improve in FY2024 from low single digits in FY2023 led by relevant pricing actions. Non-biscuit portfolio is growing at 1.5x the biscuit portfolio. Prices of some key inputs such as palm oil and packaging material have moderated. This along with benefit from forward contracts in flour will help gross margins to remain stable in the coming quarters. OPM to remain at high teens in the coming years.

Outlook

Britannia trades at 49x/42x its FY2024E/FY2025E earnings. We maintain our Buy rating on the stock with a revised PT of Rs. 5,500.