Buy Britannia Industries; target of Rs 4500: Emkay Global Financial

Emkay Global Financial's report on Britannia Industries

After a 10% correction, BRIT offers an attractive entry opportunity, given strong growth and earnings outlook vs. peers. Channel checks point to strong growth momentum - ahead of peers - driven by increased at-home consumption and share gains. Concerns about likely slowdown in growth as the economy opens up appear unwarranted. We have also built in some moderation (9% growth in FY22E) but believe that benefits of share gains from unorganized players and shift to packaged food will stay longer. 15-year trends indicate BRIT has delivered double-digit growth after every year of high growth. Gross margin outlook has improved further with recent 10% correction in wheat prices. Q1 margins were significantly higher, led by multiple drivers. While ad spends may increase, lower input prices, cost efficiencies and cut in discretionary spends offer plenty of upsides. BRIT continues to be our preferred pick benefiting from tailwinds and strong execution (highlighted in our note Keep Munching).

Outlook

Valuations at 40x FY22E EPS appear attractive given 20% earnings CAGR over FY20-23E. Reiterate Buy with a TP of Rs4,500.

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