Buy Britannia Industries; target of Rs 4125: KRChoksey

KRChoksey's research report on Britannia Industries

Britannia reported sequentially flat revenue of INR 3,419 Cr (+12.1% YoY). In Q2FY21, the company sold full range of products to the market, focused on efficiency in distribution, followed continuous replenishment system of distribution, and spent marginally in advertisement & promotions as well • EBITDA margin contracted by 121bps QoQ/+361bps YoY to 19.8% in Q2FY21, while EBITDA grew 37.2% YoY/ (down 5.8% QoQ) to INR 675 Cr. The company witnessed moderate cost inflation in the prices of key raw materials and expect the prices to be stable going forward given the positive outlook on monsoon and harvest • Reported PAT showed growth of 23.4% YoY (down 8.5% QoQ) to INR 499 Cr. (Adj. PAT increased by 23.2% YoY) • Adjusted Net Profit margin for the quarter expanded 132 bps YoY to 14.6% (down by 134bps QoQ) from 13.3% in Q2FY20.

Outlook

Since our last recommendation (report dated 05th October 2020), the stock has corrected ~7%. We reduce and assign a P/E multiple of 50.0x to the FY22 EPS of INR 82.5 (earlier 54x on FY22E EPS) to arrive at a target price of INR 4,125 per share; an upside of 16.1% over the CMP. Accordingly, we reiterate a “BUY ” rating on the shares of Britannia Industries.

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