Dolat Capital recommended accumulate rating on Britannia Industries with a target price of Rs 3469 in its research report dated February 11, 2019.
Dolat Capital's research report on Britannia Industries
Britannia’s Q3FY19 results came in line with our estimate. The company posted 7% volume growth in the base biscuit business – after double digit volume growth in last four consecutive quarters. Nevertheless, the management is confident about double digit volume growth in the ensuing quarters. A 260/40bps expansion in GM/EBITDA margin was driven by deflation in sugar and milk prices and cost efficiencies. In addition, strong double digit growth in IB was encouraging. We believe that the company is on the right track to grow the business and improve profitability with expanding distribution reach, increasing in-house manufacturing, launch of new value added products and controlling operational overheads. Moreover, rural stimulus would trigger rural consumption.
Outlook
We have tweaked our FY19E and FY20E earnings estimate at ` 48.9 and ` 60.0 respectively to factor in Q3 performance. We have introduced FY21E EPS at ` 69.5. Continue to value at 50x FY21E EPS to arrive at a TP of ` 3,469. Maintain Accumulate.
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