Result Analysis : Britannia – Q2FY21

Result Analysis :  Britannia – Q2FY21

CMP: 3,552 (As on 20-10-2020)

Total revenue from operations 3,419 Cr 

3,049 Cr (12.11%) YoY | 3,421 Cr (-0.02%) QoQ 

half yearly revenue: 6,840 Cr Vs. 5,749 Cr (18.94%)

Net Profit of 495.2 Cr 

402.7 Cr (23.12%) YoY 542.7 Cr (-8.69%) QoQ 

Half yearly Net profit: 1,038 Cr Vs. 651 Cr (59.49%)

EPS (in Rs.) 20.68

16.82 YoY |22.69 QoQ 

Half year ending EPS: 43.37 Vs. 27.26

View: Result is overall good. YoY revenue and profit both have up, strong operating margin in YoY. Although QoQ revenue flat and profit down.

Business Updates & Highlights

Q2FY21 EBITDA was around INR 675.2 Cr Vs. 492.2 Cr in Q2FY20 Vs. 716.8 Cr in QoQ therefore up by 37.2% in YoY and down by 5.9% in QoQ. EBITDA margin is around 19.7% Vs. 16.1% in YoY Vs. 20.9% in QoQ. Therefore EBITDA margin improved by 360 bps in YoY.

Board of Directors at their meeting held on 5 October 2020, approved the Scheme of Arrangement between Britannia Industries Limited and its Members (a) Issue of 1 unsecured, non‐convertible, redeemable, fully paid up Debenture of Face Value INR 29 each for every 1 fully paid up equity share of Face Value INR 1 each by utilizing the General Reserve of the Company and (b) Payment of dividend of Rs 12.50 per every 1 fully paid up equity share of Face Value INR 1 each. 

Financial

ROE and ROCE is around INR 33% and 37% respectively and book value per share is around INR 184 and share is currently trading at 20.6x of its book value. Company is currently trading at annualized PE of 44 which is fair as per Industry benchmark. Promoter holding is around 50.6% in the company which is strong and stable. FIIs, insurance cos and mutual fund hold around 16.6%, 6.5% and 4.6% in the company. Company is very strong operating cash flow as of Sep 2020 it was around INR 721.7 Cr. Debt equity ratio in Sep 2020 was 0.92 Vs. 0.38 in Sep 2019. 

Share View: Share price high 4,015 (52 week) and now 3,780. Britannia is one of the leading players in the Indian biscuit industry, with a market share of over a third in value terms. The company has a diversified portfolio of biscuits across all seven categories: glucose, marie, cookies, crackers, cream, milk, and health. Also, it has strong brands in its product portfolio including Good Day, Tiger, Marie, Nutrichoice and Milk Bikis. The strong market position is supported by a wide distribution network in both rural and urban areas. Its direct reach improved from 7.3 lakh outlets in fiscal 2014 to 21.5 lakh outlets in the first quarter of fiscal 2021. 

Position: Share support price is INR 3,560. Long term investor should continue with the company and any correction give good opportunity to add.

Opportunities: 

Britannia's focus on cost efficiencies and continued price leadership will help mitigate the impact of volatility in raw material prices on its operating margins. Given the dynamic nature of the pandemic & associated uncertainty, company were quick to resort to cost efficiencies through extraction of supply chain efficiencies, reduction in wastages and fixed costs leverage. The company also has plans to enter in new food categories and has recently launched new products such as cream wafers, baked salted snacks, milk shakes, lassis and croissants. The company intends to become a global foods company and has set up strategic business units for adjacent bakery, dairy and international business. Excellent profit growth for past 5 years which was around 20% although topline increased by 8% in last 5 years. 

Risk: 

Valuation is bit expensive and share reached at all time high. Intense competition has reduced the ability of players to pass on increase in raw material prices. The prices of key raw materials such as wheat, sugar, milk and refined palm oil depend on geo-climatic conditions, international prices, and the domestic demand-supply situation.

Sources: Various publications

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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