Axis Securities has given a buy rating to Britannia Industries with a target price of Rs 3,114.
Britannia Industries, a Wadia Group company is primarily a biscuits company, based in Bangalore. Nearly 80 per cent of Britannia’s turnover comes from biscuits which is an essential category and thereby less impacted by the Covid-19 led nationwide lockdown. During the lockdown period, consumers have resorted to up-stocking of essential items including packaged foods like biscuits. While phase 1 of lockdown witnessed serious supply chain, distribution and production challenges, in phase 2 of the lockdown these seem to have been eased out leading to improved movement of goods and improved production levels from 25-30 per cent seen in phase 1 of the lockdown.
The brokerage believes that post the lifting of lockdown, Britannia could see growing opportunities to gain market share driven by 1) distribution expansion in Hindi belt, 2) premiumisation trend and 3) acceleration in share gains prospects from regional/local players which may witness a drag on their business post Covid-19.
The share price moved up by 0.98 per cent from its previous close of Rs 2833. The last traded price is Rs 2,860.70. Incorporated in 1918, Britannia Industries has a market cap of Rs 68075.37 crore.
Investment Rationale
A resilient and diverse product portfolio catering to essential needs and also offering value added products to its consumers has ensured that Britannia is insulated to certain extent from coronavirus like pandemic, says the brokerage. Further, pressure on cash flows for regional/local players could open up opportunities for the company to gain market share and thereby narrow the gap with the No. 1 player.
The brokerage says the company’s strong in-market execution capabilities and focus on driving premiumisation (though it has been pushed by another 1-2 quarters owing to coronavirus pandemic) are key growth drivers from a long term perspective.
Financials
For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 2935.98 crore, down -2.88 per cent from last quarter sales of Rs 3022.91 crore and up 3.84 per cent from last year's same quarter sales of Rs 2827.40 crore. The company reported net profit after tax of Rs 369.58 crore in the latest quarter.
The company’s principal activity is manufacture and sale of biscuits, bread, rusk, cakes and dairy products in the domestic and international
markets. Britannia has brands like TIGER, Good-Day, 50:50 under its fold with an estimated market share of 33 per cent in the Indian biscuits industry. Biscuits contribute more than 80 per cent of the company’s turnover.