Britannia Industries Ltd (Britannia), a major player in Indian foods market with leadership position in bakery category, was established in 1892. The company operates in two business segments, namely, bakery products and dairy products. The company derives ~90% of its revenue from the biscuits segment while, ~10% of its total sales coming from non-biscuits category and International market. Having operating capacities located in Kolkata, Delhi, Chennai, Mumbai and Uttarakhand, Britannia caters majorly to domestic market.
Valuation and view
Britannia is well focused towards maintaining its growth trajectory in both the bakery and dairy segments supported by its premium product portfolio. The company’s persistent efforts in upgrading its existing portfolio as well as creating new products every now and then, proves its commitment towards customers. Looking ahead, the widening of consumer food basket with growth in disposable income will give a boost to the company’s growth and open up new success paths. Hence, we believe that the firm will continue to drive profitable growth even in tough milieu driven by strong brands in biscuits category, non-biscuits division gaining traction and focused towards cost efficiency.
We initiate BUY rating on Britannia. At a current CMP of Rs 2,548.9, Britannia is currently trading at an EV/EBITDA of 26.1x for FY16E and 17.8x for FY17E. Considering the company’s strong fundamentals, we recommend ‘BUY’ with a target price of Rs 3,021.7, which implies potential upside of ~19% to the CMP from 1 year perspective.
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