result update britannia industries -...
TRANSCRIPT
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Edelweiss Securities Limited
Britannia Industries’ (Britannia) 5.2%, 6.1% and 6.0% YoY revenue, EBITDA and PAT growth, respectively, came in line with our estimates. Amidst sluggish demand environment, volume growth was soft at 2% YoY, akin to demonetisation quarter; overall biscuits jumped 8% YoY, improving from 6% YoY in Q3FY17. Consolidated growth was impacted by subdued international (tough geopolitical situation, currency fluctuation), dairy (higher focus on value-added products) and bread businesses. Amidst input price inflation (up 10% YoY), biscuit category is clocking soft growth, further accentuated by higher competition from Parle. Britannia, however, gained market share and we expect it to benefit from pick up in demand and entry in new categories. Maintain ‘BUY’ on dips.
Sales growth soft; ad spend rationalisation, cost savings aid margin
Key highlights: (i) consolidated and standalone sales grew 5.2% and 6.6% YoY,
respectively. Consolidated sales were lower as international business was impacted by
tough geopolitical situation in Middle East & Africa and soft growth in dairy business;
and (ii) consolidated and standalone EBITDA margin rose 12bps and 9bps YoY,
respectively, despite gross margin pressure (inflation in excess of 10%), aided by ad
spends rationalisation and cost efficiency programme.
Q4FY17 conference call: Key takeaways
Biscuit category grew 2% YoY in volume terms in Q4FY17-while value segment
declined, premium & health segments clocking good growth. Focusing on direct
distribution – direct reach has doubled in 3 years and is double the market leader’s.
Britannia will not increase prices before GST implementation– requires 4% price hike to
counter input price rise. Q4FY17 ad spends dipped 20-25% YoY; targeting 40% more
cost savings in FY18 (cost savings of INR1.55bn in FY17).
Outlook and valuations: Positive; maintain ‘BUY’
Strong product pipeline and entry in new categories will help Britannia outperform
industry. Increased competition and softer category growth remain near-term
concerns. The stock is trading at 34.5x FY19E EPS. We maintain ‘BUY/SO’ with target
price of INR3,775.
RESULT UPDATE
BRITANNIA INDUSTRIES Volumes lose crunch; GST and innovations key monitorables
COMPANYNAME
EDELWEISS 4D RATINGS
Absolute Rating BUY
Rating Relative to Sector Outperform
Risk Rating Relative to Sector Low
Sector Relative to Market Underweight
MARKET DATA (R: BRIT.BO, B: BRIT IN)
CMP : INR 3,425
Target Price : INR 3,775
52-week range (INR) : 3,800 / 2,519
Share in issue (mn) : 120.0
M cap (INR bn/USD mn) : 411 / 6,359
Avg. Daily Vol.BSE/NSE(‘000) : 184.9
SHARE HOLDING PATTERN (%)
Current Q2FY17 Q1FY17
Promoters *
50.7 50.7 50.7
MF's, FI's & BK’s 11.7 11.0 9.5
FII's 16.0 17.4 18.7
Others 21.6 20.9 21.1
* Promoters pledged shares (% of share in issue)
: NIL
PRICE PERFORMANCE (%)
Stock Nifty
EW Consumer goods Index
1 month (5.5) 3.4 7.0
3 months 6.1 8.4 14.4
12 months 24.7 17.7 23.7
Abneesh Roy +91 22 6620 3141
Tanmay Sharma, CFA +91 22 4040 7586
Alok Shah +91 22 6620 3040
India Equity Research| Consumer Goods
May 30, 2017
Financials (INR mn)
Year to March Q4FY17 Q4FY16 % Chg Q3FY17 % Chg FY17 FY18E FY19E
Net revenues 22,444 21,337 5.2 22,820 (1.6) 90,541 102,469 117,178
EBITDA 3,081 2,903 6.1 3,126 (1.4) 12,782 14,713 17,295
Adjusted Profit 2,109 1,990 6.0 2,204 (4.3) 8,846 9,884 11,918
Adjusted Diluted EPS 17.6 16.6 6.0 18.4 (4.3) 73.7 82.4 99.3
Diluted P/E (x) 46.5 41.6 34.5
EV/EBITDA (x) 31.9 27.4 23.0
ROAE (%) 44.5 40.3 39.8
Consumer Goods
2 Edelweiss Securities Limited
Q4FY17 conference call: Key highlights
Demand, industry and market share
Base business grew 8% YoY in Q4FY17 with 2% YoY volume growth.
Biscuit category grew 2% YoY in volume terms in Q4FY17.
Confident of good growth in next 3-6 months if there are no negative surprises in GST.
Market environment remains challenging and demand is sluggish post demonetisation.
Market is growing in low single digits.
The company grew ahead of the market and gained market share.
Competition has intensified in certain segments amidst lower growth in the market.
Inflationary environment in biscuit industry leads to increased competition at the lower
end.
All categories – biscuits, snacks etc- grew in low single digit in FY17.
Within biscuits, entire value category is shifting – premium cookies categories is
witnessing good growth (Goodday is 60-65% of this category), health category is also
clocking good growth, value category is declining.
GST can lead to some disruption in the short term; inventory in the channel with dip
Distribution
Direct reach has doubled in past 3 years.
Direct reach of 1.55mn outlets at FY17 end .
Direct reach is more than 2x market leader.
Focus has moved from wholesale channel to direct distribution.
Reach close to 4.5mn outlets, while market leader's reach is 5.8mn.
Weak states
Gujarat, MP, Rajasthan and UP grew 23%, 13%, 20% and 9% YoY, respectively, in FY17.
Only ~1/5th of the leader in the Hindi belt.
Britannia is gaining market share in UP.
New products and LUP
Plugging portfolio gap and launched Gooday Wonderfulls (mid premium range).
Also launched Tiger Kreemz.
Launched INR10 SKU in Jim Jam, 50-50 and Vita Marie.
International
Continues to be severely impacted on account of deteriorating geopolitical situation
and currency fluctuations in Middle East and Africa.
Has entered Nepal.
Britannia Industries
3 Edelweiss Securities Limited
Dairy and bread
Focusing on driving products with high profitability and reducing reliance on less
profitable commoditized products.
Clocked good growth in the cheese business. Ghee declined due to lower focus.
Dairy business will stabilize in the next 6-9 months.
Bread business recovered after the issue of Potassium Bromate. However, growth have
not reached expected level.
Margins
Price action was limited in Q4FY17 due to higher competitive intensity and uncertainty
due to GST.
Not looking at price increase before GST.
Rationalized advertising costs and focused on cost efficiency programme.
The company endeavours to maintain margin at the current level for some quarters and
then reevaluate to expand.
Focus on cost savings has increased significantly – looking at 40% more cost savings in
FY18 compared to FY17.
Cost savings of INR1.55bn in FY17.
During FY17 the company did not take enough pricing to cover the entire raw material
inflation.
Q4FY17 ad spends were down 20-25% YoY. FY17 ad spends fell 13% YoY.
Commodity prices softened a tad in Q4FY17.
Will require price increase of 4% YoY to mitigate raw material price inflation.
Chipita
Formed joint venture with Chipita (Greek company) for manufacturing and selling long
life filled croissants. The project is expected to be commercialized by July 2018.
JV with Chipita is 60:40; 60% with Britannia.
Targeting INR2bn revenue with the first line of products in the first 3 years of
operation.
Has done well in Middle East, Egypt etc, and this category is as large as the biscuit
category in some of these markets.
Chipita already sells chocolate spread in some of India's markets.
Capex for this project is INR800-850mn.
Intercorporate deposit (ICD) and royalty
ICD as of March 2017 is at the same level as earlier.
Subsequent to March 2017, it has dipped by INR400mn.
INR340mn is royalty to group companies (0.4% of revenue).
Consumer Goods
4 Edelweiss Securities Limited
Inventory, loans and advances and capex
Inventory has increased due to opportunistic buying of commodities in the inflationary
environment.
In the process of finalizing purchase of property for a food park in Maharashtra, loans
and advances have increased.
Capex for Maharashtra will be INR1bn.
Cash and cash equivalent of INR12bn.
Total FY18 capex is expected to be INR3.5-4bn.
GST
Tax neutral rate for company is 18%.
Tax neutral rate for the industry will be lower by 100-150bps.
Chart 1: Consolidated sales growth
Chart 2: Standalone sales growth
Source: Company, Edelweiss research
0.0
4.0
8.0
12.0
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20.0
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Britannia Industries
5 Edelweiss Securities Limited
Chart 3: Gross margin (%)
Chart 4: EBITDA margins (%)
Chart 5: Volume Growth
Source: Company, Edelweiss research
30.0
33.0
36.0
39.0
42.0
45.0
Q3
FY1
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(%)
Gross margins
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(%)
EBITDA margins
0.0
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7
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7
Q3
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7
Q4
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7
(%)
Volume growth
Consumer Goods
6 Edelweiss Securities Limited
Table 1: Britannia standalone result
Source: Company, Edelweiss research
Outlook and valuations: Positive; maintain ‘BUY’
Britannia is value leader in the biscuit category (ahead of Parle) and has sustained market
share gains. The company, we believe, will continue to grow ahead of the market in FY18
following deepening distribution, especially in rural areas (total universe of 7.7mn outlets,
of which the company is present in 4.5mn), driving growth in weak states (Gujarat,
Madhya Pradesh, UP and Rajasthan growth has improved and market share has seen an
uptrend) and increasing traction within modern trade segments. The company is also filling
portfolio gap and has entered the premium cookie segment (launched Goodday Wonderfull)
and will be focusing on the cream segment.
With recovery in growth rates of the biscuit industry, increase in market share post GST
(~35% of total biscuits are manufactured by smaller/regional brand players) and rise in
demand led by government measures (7th Pay Commission payout, OROP etc), we expect
FY18 to be better. However, rise in the competitive intensity amidst rising raw material
prices and lower industry growth remain a concern on growth and margins in the short
term. Britannia, however, is targeting 40% more cost savings compared to FY17, which will
protect margin, while rising premiumisation (growth in premium segment is much faster
Year to march Q4FY17 Q4FY16 % change Q3FY17 % change
Net Sales 20,670 19,357 6.8 20,932 (1.2)
Other Op. Income 223 247 (9.7) 234 (4.7)
Total 20,893 19,604 6.6 21,166 (1.3)
Purchse of stock 2,370 2,041 16.1 2,357 0.5
(Inc)/Dec in stock (184) 432 (142.7) (63) 192.1
Consumption of Raw material 10,803 9,427 14.6 10,863 (0.6)
Employee cost 612 540 13.5 604 1.4
Other Expenditure 4,431 4,497 (1.5) 4,445 (0.3)
Total 18,032 16,936 6.5 18,207 (1.0)
EBITDA 2,861 2,668 7.2 2,960 (3.3)
Depreciation 268 240 11.8 243 10.4
EBIT 2,593 2,428 6.8 2,717 (4.5)
Other inc 326 348 (6.5) 370 (12.0)
Interest net 4 3 12.9 4 (2.8)
Exceptional item - - NA - NA
PBT 2,915 2,773 5.1 3,083 (5.4)
Tax 948 855 10.9 968 (2.1)
PAT 1,967 1,919 2.5 2,115 (7.0)
Equity Shares (FV- INR2) 120.0 120.0 - 120.0 -
EPS 16.4 16.0 2.5 17.6 (7.0)
COGS 62.2 60.7 147 62.2 0
Employee 2.9 2.8 18 2.9 8
Other expenditure 21.2 22.9 (173) 21.0 21
EBITDA 13.7 13.6 9 14.0 (29)
PAT 9.4 9.8 (37) 10.0 (58)
Tax Rate 32.5 30.8 169 31.4 111
Expenses
as % of net revenues
Britannia Industries
7 Edelweiss Securities Limited
than value segment) will boost margin (current raw material inflation remains a key
monitorable, which we believe will be taken care of by price hikes post GST. We assign 38x
FY19E earnings and arrive at target price of INR3,778. We maintain our ‘BUY’ on dips
recommendation and ‘Sector Outperformer’ rating.
Chart 6: One- year forward P/E band
Source: Edelweiss research
0
800
1,600
2,400
3,200
4,000
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-12
No
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R)
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Consumer Goods
8 Edelweiss Securities Limited
Financial snapshot (INR mn) Year to March Q4FY17 Q4FY16 % change Q3FY17 % change FY17 FY18E FY19E
Net revenues 22,444 21,337 5.2 22,820 (1.6) 90,541 102,469 117,178 Cost of materials 13,915 12,878 8.1 14,190 (1.9) 55,887 63,379 72,325
Conversion and other charges - - - 4,660 5,180 5,814
Advt. sales & promotions - - - 7,170 8,125 9,302
Employee expenses 897 873 2.7 882 1.6 3,526 3,860 4,419
Other expenses 4,551 4,684 (2.8) 4,622 (1.5) 6,516 7,211 8,023
Total expenditure 19,363 18,434 5.0 19,694 (1.7) 77,759 87,755 99,883
EBITDA 3,081 2,903 6.1 3,126 (1.4) 12,782 14,713 17,295
Depreciation 322 308 4.5 303 6.4 1,193 1,399 1,609
EBIT 2,759 2,594 6.3 2,823 (2.3) 11,589 13,314 15,686
Other income 335 362 (7.5) 389 (13.8) 1,505 1,156 1,753
Interest 13 15 (10.8) 11 20.0 55 43 42
Profit before tax 3,081 2,942 4.7 3,201 (3.7) 13,040 14,427 17,397
Provision for taxes 973 952 2.2 997 (2.4) 4,197 4,545 5,480
Minority interest (2) - - - 1 1
Associate profit share - 1 (100.0) 1 (100.0) 3 2 2
Exceptional Items
Reported net profit 2,109 1,990 6.0 2,204 (4.3) 8,846 9,884 11,918
Adjusted Profit 2,109 1,990 6.0 2,204 (4.3) 8,846 9,884 11,918
No. of shares (mn) 120 120 120 120 120 120
Adjusted Diluted EPS 17.6 16.6 6.0 18.4 (4.3) 73.7 82.4 99.3
Diluted P/E (x) - - - 46.5 41.6 34.5
EV/EBITDA (x) - - - 31.9 27.4 23.0
ROAE (%) - - - 44.5 40.3 39.8
Cost of materials 62.4 61.0 62.7 62.4 62.4 62.2
Employee cost 4.0 4.1 3.9 3.9 3.8 3.8
Conversion and other charges - - - 5.1 5.1 5.0
Adv. & sales promotions - - - 7.9 7.9 7.9
Other expenditure 20.3 22.0 20.3 7.2 7.0 6.8
EBITDA 13.7 13.6 13.7 14.1 14.4 14.8
Adjusted net profit 9.4 9.3 9.7 9.8 9.6 10.2
Tax rate 31.6 32.4 31.1 32.2 31.5 31.5
Britannia Industries
9 Edelweiss Securities Limited
Company Description
Britannia is the value leader in the biscuit category and is a 123 year old brand in India.
Britannia has a presence in the biscuit, bread, cakes, rusk and dairy segment. In biscuits the
company has brands like Good Day, Crackers, Nutrichoice, Marie Gold, Tiger, Milk Bikis, Jim
Jam, Bourbon, Little Hearts, Pure Magic and Nice Time. These brands are present in close to
4.5mn outlets. Britannia is focussed on driving growth through its 7 power brands –
GoodDay, Tiger, Marie, Milk Bikis, 50:50, Treat and Nutri Choice. Britannia is present in
dairy with value added products like cheese, yogurt, flavoured milk, butter etc and plans to
go for full integration of this business. Apart from this the company is also present in cakes
and rusks which remain a key focus area. On the international front Britannia exports to ~72
countries and has international subsidiary in Middle East. The company wants to increase
the overall salience of the international business from 5% currently to ~20% over the long
term. Investment Theme
Britannia is expected to outperform the industry growth led by strong innovation pipeline
and distribution expansion. The company is focusing on reducing the gap with Parle and is
driving inroads in the market where it is weak i.e. the hinterland. Britannia is not only
launching new products but also relaunching its key brands (like GoodDay, Milk BIkis and
Tiger) which are yield good results. The company has commissioned its R&D facility which
will also give a boost to innovation. Britannia continues to focus on driving further
efficiencies in terms of reduced breakage, sales returns and supply chain efficiencies –
targeting 40% more savings in FY18.
Key Risks
Increased competitive intensity: Rising competitive intensity (especially from players like
Patanjali) can potentially result in volume pressures. Also, it can result in increased A&P
spends and investments towards the brand resulting in margin pressure. Maintaining
market share becomes challenging in such a scenario.
Raw material prices: Rise in the raw material prices like wheat, flour, RPO, milk can lead to
pressure on the gross margins. Inability to pass on the pricing pressure to consumers due to
higher competition can result in further pressure.
Rural slowdown: Biscuit is a highly penetrated category and slowdown, particularly in rural
areas, will lead to slowing of the category growth rates.
Failure in new innovations and segments: Britannia has a strong pipeline of new innovations
and it also plans to solidify its hold in the dairy, cake, rusk and international markets.
However, failure of new launches and disappointing entry in new segments cannot be ruled
out completely.
10 Edelweiss Securities Limited
Consumer Goods
Financial Statements
Income statement (INR mn)
Year to March FY16 FY17 FY18E FY19E
Net revenue 83,254 89,623 101,569 116,278
Other Operating Income 718 918 900 900
Total operating income 83,972 90,541 102,469 117,178
Materials costs 50,127 55,887 63,379 72,325
Employee costs 3,414 3,526 3,860 4,419
Other Expenses 1,864 2,214 2,438 2,674
Ad. & sales costs 7,378 7,170 8,125 9,302
Conversion charges 4,735 4,660 5,180 5,814
Carriage and distribution 4,310 4,302 4,774 5,349
EBITDA 12,144 12,782 14,713 17,295
Depreciation 1,134 1,193 1,399 1,609
EBIT 11,010 11,589 13,314 15,686
Add: Other income 1,243.5 1,505.4 1,155.81 1,752.88
EBIT incl. other income 12,253 13,095 14,470 17,439
Less: Interest Expense 49 55 43 42
Profit Before Tax 12,205 13,040 14,427 17,397
Less: Provision for Tax 3,961 4,197 4,545 5,480
Reported Profit 8,246 8,846 9,884 11,918
Adjusted Profit 8,246 8,846 9,884 11,918
Shares o /s (mn) 120 120 120 120
Adjusted Basic EPS 68.7 73.7 82.4 99.3
Diluted shares o/s (mn) 120 120 120 120
Adjusted Diluted EPS 68.7 73.7 82.4 99.3
Adjusted Cash EPS 78.2 83.7 94.1 112.8
Dividend per share (DPS) 20.0 22.1 24.7 29.8
Dividend Payout Ratio(%) 35.0 30.0 30.0 30.0
Tax rate (%) 32.5 32.2 31.5 31.5
Common size metrics
Year to March FY16 FY17 FY18E FY19E
Materials costs 60.2 62.4 62.4 62.2
Staff costs 4.1 3.9 3.8 3.8
Ad. & sales costs 8.9 8.0 8.0 8.0
Conversion charges 5.7 5.2 5.1 5.0
Carriage and distribution 5.2 4.8 4.7 4.6
Interest Expense 0.1 0.1 - -
EBITDA margins 14.6 14.3 14.5 14.9
EBIT margins 13.2 12.9 13.1 13.5
Net Profit margins 9.9 9.9 9.7 10.3
Growth ratios (%)
Year to March FY16 FY17 FY18E FY19E
Revenues 10.4 7.8 13.2 14.4
EBITDA 47.9 5.3 15.1 17.5
PBT 50.4 6.8 10.6 20.6
Adjusted Profit 41.5 7.3 11.7 20.6
EPS 41.5 7.3 11.7 20.6
Key Assumptions
Year to March FY16 FY17 FY18E FY19E
Macro
GDP(Y-o-Y %) 7.2 6.5 7.1 7.7
Inflation (Avg) 4.9 4.8 5.0 5.2
Repo rate (exit rate) 6.8 6.0 5.8 5.8
USD/INR (Avg) 65.0 67.5 69.0 69.0
Company
Biscuits and high protein food 11 10 12 14
Bread 12 5 9 10
Cake and rusk 18 10 25 25
Dairy (2) - 20 20
International bus growth 20.4 2.0 10.0 15.0
COGS as % of sales 58.1 62.4 62.4 62.2
A&P as % of sales 8.6 8.0 8.0 8.0
Conversion charges as % of sales 5.5 5.2 5.1 5.0
Carriage & distribution as % of sales 5.0 4.8 4.7 4.6
Other exp (% net rev) 5.5 2.5 2.4 2.3
Tax rate (%) 32.7 32.2 31.5 31.5
Capex (INR mn) 2,077 3,500 3,500 3,500
Debtor days 6 7 7 7
Inventory days 31 40 35 35
Payable days 54 49 53 53
Cash conversion cycle (17) (2) (11) (11)
Dep. (% gross block) 6.7 6.0 6.0 6.0
Yield on cash 17.4 29.8 22.0 18.0
11 Edelweiss Securities Limited
Britannia Industries
Cash flow metrics
Year to March FY16 FY17 FY18E FY19E
Operating cash flow 9,614 6,961 11,686 11,973
Investing cash flow (7,052) (2,094) (2,344) (1,747)
Financing cash flow (2,483) (4,431) (4,857) (6,037)
Net cash Flow 79 437 4,485 4,189
Capex 2,077 3,500 3,500 3,500
Dividend paid (2,888) (4,450) (4,972) (5,995)
Profitability and efficiency ratios
Year to March FY16 FY17 FY18E FY19E
ROAE (%) 54.7 44.5 40.3 39.8
ROACE (%) 74.4 61.6 55.6 55.3
Inventory Days 31 40 35 35
Debtors Days 6 7 7 7
Payable Days 54 49 53 53
Cash Conversion Cycle (17) (2) (11) (11)
Current Ratio 1.3 1.4 1.6 1.7
Gross Debt/EBITDA 0.1 0.1 0.1 0.1
Gross Debt/Equity 0.1 0.1 0.1 -
Adjusted Debt/Equity 0.1 0.1 0.1 -
Net Debt/Equity (0.2) (0.2) (0.3) (0.4)
Interest Coverage Ratio 226.1 212.6 312.2 373.5
Operating ratios
Year to March FY16 FY17 FY18E FY19E
Total Asset Turnover 5.1 4.3 3.9 3.7
Fixed Asset Turnover 9.3 8.4 7.9 7.8
Equity Turnover 5.5 4.5 4.1 3.9
Valuation parameters
Year to March FY16 FY17 FY18E FY19E
Adj. Diluted EPS (INR) 68.7 73.7 82.4 99.3
Y-o-Y growth (%) 41.5 7.3 11.7 20.6
Adjusted Cash EPS (INR) 78.2 83.7 94.1 112.8
Diluted P/E (x) 49.8 46.5 41.6 34.5
P/B (x) 23.3 18.6 15.2 12.5
EV / Sales (x) 4.9 4.5 3.9 3.4
EV / EBITDA (x) 33.2 31.5 27.1 22.8
Dividend Yield (%) 0.6 0.6 0.7 0.9
Balance sheet (INR mn)
As on 31st March FY16 FY17 FY18E FY19E
Share capital 240 240 240 240
Reserves & Surplus 17,425 21,821 26,734 32,657
Shareholders' funds 17,665 22,061 26,974 32,897
Minority Interest 25 22 20 18
Short term borrowings 934 916 1,073 1,073
Long term borrowings 408 500 500 500
Total Borrowings 1,343 1,416 1,573 1,573
Long Term Liabilities 68 68 68 68
Def. Tax Liability (net) (277) (277) (277) (277)
Sources of funds 18,823 23,290 28,358 34,279
Gross Block 18,067 21,567 25,067 28,567
Net Block 8,210 10,517 12,618 14,509
Capital work in progress 901 1,000 1,000 1,000
Goodwill 1,159 1,159 1,159 1,159
Intangible Assets 1,292 1,292 1,292 1,292
Current Investments 3,965 3,965 3,965 3,965
Cash and Equivalents 4,841 5,254 9,738 13,928
Inventories 4,407 6,125 6,077 6,935
Sundry Debtors 1,706 1,719 1,948 2,230
Loans & Advances 8,995 8,995 8,995 8,995
Other Current Assets 378 378 378 378
Current Assets (ex cash) 15,486 17,217 17,399 18,538
Trade payable 7,420 7,503 9,203 10,502
Other Current Liab 8,051 8,051 8,051 8,051
Total Current Liab 15,471 15,554 17,254 18,553
Net Curr Assets-ex cash 15 1,663 145 (14)
Uses of funds 18,823 23,290 28,358 34,279
BVPS (INR) 147.2 183.9 224.8 274.2
Free cash flow (INR mn)
Year to March FY16 FY17 FY18E FY19E
Reported Profit 8,246 8,846 9,884 11,918
Add: Depreciation 1,134 1,193 1,399 1,609
Interest (Net of Tax) 33 37 29 29
Others 2,884 (1,491) (1,144) (1,742)
Less: Changes in WC 2,684 1,624 (1,518) (159)
Operating cash flow 9,614 6,961 11,686 11,973
Less: Capex 2,077 3,500 3,500 3,500
Free Cash Flow 7,536 3,461 8,186 8,473
12 Edelweiss Securities Limited
Consumer Goods
Peer comparison valuation
Market cap Diluted P/E (X) EV / EBITDA (X) ROAE (%)
Name (USD mn) FY18E FY19E FY18E FY19E FY18E FY19E
Britannia Industries 6,359 41.6 34.5 27.1 22.8 40.3 39.8
Asian Paints 17,205 47.6 38.4 29.9 23.9 33.0 34.5
Dabur 7,585 33.8 28.9 29.0 24.4 27.5 27.7
Hindustan Unilever 35,914 46.2 38.8 32.0 26.7 106.5 113.0
ITC 58,529 30.7 26.3 20.4 17.3 30.5 31.9
Nestle Ltd 9,846 49.3 38.1 27.1 21.3 39.4 41.9
Median - 43.9 36.3 28.1 23.4 36.2 37.1
AVERAGE - 41.6 34.2 27.6 22.7 46.2 48.1
Source: Edelweiss research
13 Edelweiss Securities Limited
Britannia Industries
Top 10 holdings
Perc. Holding Perc. Holding
Arisaig Partners Asia Pte 2.9 Life Insurance Corp Of India 1.8
Prudential ICICI Asset Mgmt Co 1.7 General Insurance Corp Of India 1.0
Royal Bank Of Scotland 0.9 Kotak Mahindra 0.8
Vanguard Group 0.7 Birla Sun Life Asset Management 0.7
UTI Asset Management 0.7 T Rowe Price 0.6
*as per last available data
Insider Trades
Reporting Data Acquired / Seller B/S Qty Traded
14 Sep 2016 Varun Berry Sell 25000.00
19 Aug 2016 Varun Berry Sell 29430.00
*in last one year
Bulk Deals Data Acquired / Seller B/S Qty Traded Price
No Data Available
*in last one year
Additional Data
Directors Data Mr. Varun Berry Managing Director Mr. Nusli N Wadia Non Executive Chairman
Mr. A K Hirjee Non Executive Director Mr. Jeh N Wadia Non Executive Director
Mr. Ness N Wadia Non Executive Director Mr. Avijit Deb Independent Director
Mr. S S Kelkar Independent Director Mr. Nimesh N Kampani Independent Director
Mr. Keki Dadiseth Independent Director Dr. Ajai Puri Independent Director
Mr. Nasser Munjee Independent Director Mrs. Ranjana Kumar Independent Director
Auditors - BSR & Co. LLP
*as per last annual report
14 Edelweiss Securities Limited
Company Absolute
reco
Relative
reco
Relative
risk
Company Absolute
reco
Relative
reco
Relative
Risk
Asian Paints BUY SO M Bajaj Corp HOLD SU H
Berger Paints BUY SO L Britannia Industries BUY SO L
Colgate HOLD SP M Dabur BUY SO M
Emami BUY SO H GlaxoSmithKline Consumer
Healthcare
HOLD SU M
Godrej Consumer BUY SO H Hindustan Unilever HOLD SP L
ITC BUY SO M Marico BUY SO M
Nestle Ltd HOLD SP L Pidilite Industries BUY SO M
United Spirits HOLD SP H
RATING & INTERPRETATION
ABSOLUTE RATING
Ratings Expected absolute returns over 12 months
Buy More than 15%
Hold Between 15% and - 5%
Reduce Less than -5%
RELATIVE RETURNS RATING
Ratings Criteria
Sector Outperformer (SO) Stock return > 1.25 x Sector return
Sector Performer (SP) Stock return > 0.75 x Sector return
Stock return < 1.25 x Sector return
Sector Underperformer (SU) Stock return < 0.75 x Sector return
Sector return is market cap weighted average return for the coverage universe
within the sector
RELATIVE RISK RATING
Ratings Criteria
Low (L) Bottom 1/3rd percentile in the sector
Medium (M) Middle 1/3rd percentile in the sector
High (H) Top 1/3rd percentile in the sector
Risk ratings are based on Edelweiss risk model
SECTOR RATING
Ratings Criteria
Overweight (OW) Sector return > 1.25 x Nifty return
Equalweight (EW) Sector return > 0.75 x Nifty return
Sector return < 1.25 x Nifty return
Underweight (UW) Sector return < 0.75 x Nifty return
15 Edelweiss Securities Limited
Britannia Industries
Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.
Board: (91-22) 4009 4400, Email: [email protected]
Aditya Narain
Head of Research
Coverage group(s) of stocks by primary analyst(s): Consumer Goods
Asian Paints, Bajaj Corp, Berger Paints, Britannia Industries, Colgate, Dabur, Godrej Consumer, Emami, Hindustan Unilever, ITC, Marico, Nestle Ltd, Pidilite Industries, GlaxoSmithKline Consumer Healthcare, United Spirits
Distribution of Ratings / Market Cap
Edelweiss Research Coverage Universe
Rating Distribution* 161 67 11 240 * 1stocks under review
Market Cap (INR) 156 62 11
Date Company Title Price (INR) Recos
Recent Research
26-May-17 ITC Strong performance; GST to bolster growth; Result Update
309 Buy
22-May-17 Pidilite Industries
Volumes on recovery road; GST to propel growth; Result Update
740 Buy
17-May-17 Hindustan Unilever
Good recovery; healthy mix of volumes and pricing; Result Update
1,009 Hold
> 50bn Between 10bn and 50 bn < 10bn
Buy Hold Reduce Total
Rating Interpretation
Buy appreciate more than 15% over a 12-month period
Hold appreciate up to 15% over a 12-month period
Reduce depreciate more than 5% over a 12-month period
Rating Expected to
-
149
297
446
594
743
Jan
-14
Feb
-14
Mar
-14
Ap
r-1
4
May
-14
Jun
-14
Jul-
14
Au
g-1
4
Sep
-14
Oct
-14
No
v-1
4
De
c-1
4
(IN
R)
One year price chart
2,500
2,780
3,060
3,340
3,620
3,900
May
-16
Jun
-16
Jul-
16
Jul-
16
Au
g-1
6
Sep
-16
Oct
-16
Oct
-16
No
v-1
6
De
c-1
6
De
c-1
6
Jan
-17
Feb
-17
Feb
-17
Mar
-17
Ap
r-1
7
Ap
r-1
7
May
-17
(IN
R)
Britannia Industries
16 Edelweiss Securities Limited
Consumer Goods
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17 Edelweiss Securities Limited
Britannia Industries
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18 Edelweiss Securities Limited
Consumer Goods
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