Moneycontrol BureauBrokerage house Goldman Sachs has initiated coverage on FMCG major Britannia industries with a buy rating, citing upsides from expansion of its diary business and of its retail distribution.Goldman has a 12-month price target of Rs 3400 for the stock.“Through FY19, we expect Britannia Industries, India’s biscuit marketleader, to achieve sales/EBITDA growth of 14 percent/19 percent (vs. 12 percent/14 percent for our staples coverage) on higher penetration levels, expanding distribution and improved operating leverage,” says the Goldman Sachs note.“We expect CROCI (cash return on capital invested) to expand 15 percent over the next three years due to cash generation, and we see further upside potential to our sales estimates from its dairy expansion, which we see as a big opportunity,” the note says.According to Goldman, biscuits, despite being available at similar price levels as basic personal care products like soaps and toothpastes, are underpenetrated in India. The brokerage believes penetration levels can move higher to 90 percent plus levels from the roughly 70 percent currently driven by the rise in income levels of the ‘urban mass’ segment.
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