Buy Britannia Industries; target of Rs 4279: Prabhudas Lilladher

Prabhudas Lilladher's research report on Britannia Industries

We are Cutting FY21/22/23E EPS by 5.9/6.8/7.5% despite EBIDTA change by -1/2.7/1% due to higher interest burden (proposed bonus debentures of Rs10bn) and Rs28.4bn dividend payout for FY20/FY21. We believe best quarter is behind and impact of unlocking and pantry destocking has started softening growth rates. Long term outlook remains intact led by innovations, affordable packs/pricing (biscuits–Rs5/10 in premium brands), direct distribution reach (3x since 2014), success in non- biscuits segments (Cake, Cream wafers, salted snacks, milkshakes – 19% sales CAGR over FY20-23), cost efficiency programs (Rs2.5bn/1.5-2% of sales) and high growth in Hindi heartland (1.2-2.5x). We estimate EBIDTA CAGR of 19% and PAT CAGR of 13.8% due to lower other income and higher interest. FCF/Adj PAT at 63% (38.5% in FY18) is rising, although its lower than 83% for NEST, largest foods player.

Outlook

We cut target price from Rs4316 (SOTP based on 46xSept22 EPS) to Rs4279 (46xFY23 EPS). BRIT at 41.4xDec22 consol EPS trades at 22% discount to NEST. Retain Buy.

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