. RESULT UPDATE 30th May, 2017
May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 India Equity Institutional Research II Result Update - Q4FY17 II 30 th May, 2017 2 Growth Path ahead CMP INR 3419 Target INR 3543 Potential Upside 3.6% Market Cap (INR Mn) 410937 Recommendation HOLD Sector FMCG Result highlights posted its Q4FY17 results, its revenue stood at INR 23161.2 Mn was in-line with our estimates however revenue growth registered was 5.8% yoy and de-growth of 1.7% qoq as against our expectation of 9.8% yoy and 2.0% qoq. EBIDTA stood at INR 3080.9Mn which is a growth of 6.1% yoy and de-growth of 1.4% qoq due to higher raw material cost. EBIDTA margins stood at 13.3% which was below our expectation of 13.8%. PAT after exceptional for Q4FY17 was INR 2107.6 Mn with growth of 5.9% yoy and de-growth of 4.3% qoq. PAT margins stood at 9.1% as against our expectation of 9.3%. MARKET DATA Shares outs (Mn) 120 EquityCap (INR Mn) 240 Mkt Cap (INR Mn) 410937 52 Wk H/L (INR) 3796/2524 Volume Avg (3m K) 165.3 Face Value (INR) 2 Bloomberg Code BRIT IN SHARE PRICE PERFORMANCE 135 120 105 90 Sensex Britannia Inds. MARKET INFO SENSEX 31159 NIFTY 9625 KEY FINANCIALS Particulars (INR Mn) FY15 FY16 FY17E FY18E FY19E Sales 78584.0 86262.0 93241.0 103338.0 114287.0 EBITDA 8635.0 12144.0 12782.0 14599.0 16600.0 PAT 6865.0 8135.0 8843.0 10001.0 11323.0 EBITDA Margins % 11.0% 14.1% 13.7% 14.1% 14.5% PAT Margins % 8.7% 9.4% 9.5% 9.7% 9.9% EPS 45.2 68.7 73.7 83.4 94.4 ROE 43.7% 39.4% 32.8% 29.8% 27.3% Source: Company, Single digit revenue growth continues: posted its Q4FY17 results and Net revenue growth stood at 5.8% yoy and de-growth of 1.7% qoq on back of slow recovery from the impact of demonetization in Q3FY17. Revenue for Q4FY17 stood at INR 23161.2Mn. During FY17, revenue stood at INR 92321.0Mn with growth of 8% yoy. With the motive to launch new innovative products and enter new markets company has launched Good day wonderfulls in the markets in south and also will launch In other part of India. It has enter and signed JV with Chipita a greek company and have enter into a croissants category. Margin remains flat: Britannia s Industries Ltd has seen increase in cost of its raw material price quarter on quarter which is tapering its margins down. Overall in Q4FY17 raw material have seen increase of around 10% and during FY17 we saw increase in raw materials like flour by 11%, RPO by 16%, sugar by 34% and milk by 23%. During Q4FY17, EBIDTA posted was INR 3080.9Mn with growth of 6.1% yoy and de-growth of 4.1% qoq. Its EBIDTA margins stood at 13.3% which was flat as compared to Q4FY16 and Q3FY17, with these we saw improvement of 4bps yoy and 3bps qoq. EBIDTA for FY17, remained at INR 12782.0 Mn with margins at 13.7% as compared to 14.1% in FY16. PAT for the quarter remained at INR 2107.6 Mn with growth of 5.9% yoy and de-growth of 4.3% qoq. PAT margins seen at 9.1% as compared to 9.1% yoy and 9.3qoq, which was an increase of 1bps yoy and decrease of 25bps. For FY17, PAT stood at INR 8843.0 Mn with margins at 9.5% as compared to 9.4% in FY16. Valuations & Views: We believe that many of the FMCG companies has faced slow down in Q4FY17 as well and is in the phase of recovering demand in FY18. Britannia has posted better results but still the there is challenging environment. We believe that with management focus on growing its portfolio by filling in the gaps, innovation, increasing presence of distribution channel, controlling inflation of raw material prices, etc has helped it to grow faster in the market and going ahead, with same strategy it would grow at around 10-11% Fy18E-FY19E. It also plans to keep entering new category every year with innovative products and untapped opportunities in the domestic and international market. With positive move on the plans to mitigate inflation of raw material price we assume margins to be around 14% to 14.5%. At CMP of INR 3419, we recommend HOLD rating on the stock with a target of INR 3543 with a potential upside of 3.6% SHARE HOLDING PATTERN (%) Particulars Mar 17 Dec 16 Sep16 Promoters 50.73 50.73 50.73 FIIs 16.02 17.4 18.72 DIIs 11.65 11 9.5 Others 21.6 20.87 21.06 Total 100 100 100 9.8% 20.2% PAT CAGR between FY15 and Revenue CAGR between FY15 and FY19E FY19E
Q4FY17 Result Snapshot Exhibit 1 Q4FY17 Quarterly Income Statement (INR Mn) 3 Particulars Q4 FY17 Q3 FY17 Q4 FY16 Q-o-Q % Change Y-o-Y % Change Net Sales & Other Operating Income 23161.2 23552.7 21889.5-1.7% 5.8% Total Expenditure 20080.3 20427.2 18986.9-1.7% 5.8% Cost of Raw Materials 12055.3 12127.3 10797-0.6% 11.7% Purchase of Finished Goods 2182.5 2074.4 1681.1 5.2% 29.8% (Increase) / Decrease In Stocks -322.4-11.4 399.4 - - Excise Duty 717.4 733.0 552.7-2.1% - Employee Cost 896.6 882.1 873.1 1.6% 2.7% Operating & Manufacturing Expenses 4550.9 4621.8 4683.6-1.5% -2.8% EBIDTA 3080.9 3125.5 2902.6-1.4% 6.1% EBITDA Margins (%) 13.3% 13.3% 13.3% 3bps 4bps Depreciation 322.1 302.7 308.2 6.4% 4.5% EBIT 2758.8 2822.8 2594.4-2.3% 8.8% Other Income 335.1 388.8 362.3-13.8% -7.5% Interest 13.2 13.0 14.8 1.5% -10.8% PBT 3080.7 3198.6 2941.9-3.7% 4.7% Tax 973.1 996.7 952.1-2.4% 2.2% PAT before Exceptional 2107.6 2201.9 1989.8-4.3% 5.9% PAT Margin (%) 9.1% 9.3% 9.1% -25bps 1bps EPS 17.6 18.4 16.6-4.3% 6.0% Source: Company,
4 Concall Highlights: Management believes that Q4FY17 and FY17 was a good quarter and a year but still they are some challenges in the market like sluggish demand, increase in raw materials prices, etc but focus will be to grow distribution channel and increase direct reach, grow in areas where there are gaps (Hindi belt areas), also focus on new products, new categories, new countries and new geographies with expansion in international markets. Britannia focus remains to grow faster than market, Direct reach - By expanding its direct distribution reach and low dependency on wholesale channel has helped company to add outlets and reach the mark to more than 1.55mn outlets. Focus on Hindi Belt areas (weak market) as currently they are just 1/5 th of the market leader. During FY17, Growth for Gujarat remained at 23%, Rajasthan remained at 20%, MP at 13% and UP with flat growth of 9%. Other business: It includes Breads, Dairy & International Business Breads Struggling for growth in the category but some recovery has been seen post Potassium Bromate issue. Dairy business Focus to remain on products which drives high profits and reduce dependence on commodity products business. Expects dairy segment to stabilize in 6-8months. International Business Some pressure has been felt in Middle East & Africa business due to geopolitical situation and currency fluctuation. Company is setting up its own operations in Nepal. Also plans to enter new international markets. Spurt in Raw material price: During the quarter inflation in raw material price was high and reached up by 11% with flour, 34% in sugar, 23% in milk and around 16% in RPO, and to mitigate this pricing pressure company taken some cost efficiency measure which lead to protect margins. JV with Chipita (Greek Company) The JV is in between Britannia and Chipita in ratio 60:40. it has entered the new segment of croissants where company would be manufacturing and selling croissants, the factory would be setup up in Tamil Nadu and will be commercialized in mid FY18. Capex plans is around 80-85Crs while management expects to bag in revenue of around INR 200crs in 2-3 years after commencement. Future plans: To focus on premium biscuits category, increase distribution reach and revamp cream biscuits segments, more innovation in cake & Rusk segments and also in new category and other adjacent segments.
Exhibit 2 - Income Statement (INR Mn) 5 INR Mn FY15 FY16 FY17 FY18E FY19E Net Sales 78584.0 86262.0 93241.0 103338.0 114287.0 EXPENDITURE : Cost of Materials Consumed 41200.0 43315.0 48396.0 53414.0 58617.0 Purchase of Stock In Trade 6023.0 6855.0 8033.0 8074.0 8861.0 (Increase) / Decrease In Stocks -304.0-43.0-542.0 62.0 68.0 Total RM Costs 46919.0 50127.0 55887.0 62110.0 68160.0 Employee Cost 2803.0 3414.0 3526.0 3895.0 4384.0 Other Expenses 20227.0 20577.0 21046.0 22734.0 25143.0 Total Expenditure 69949.0 74118.0 80459.0 88739.0 97687.0 Operating Profit (EBIDTA) 8635.0 12144.0 12782.0 14599.0 16600.0 EBIDTA Margin % 11.0% 14.1% 13.7% 14.1% 14.5% Depreciation 1445.0 1134.0 1193.0 1389.0 1605.0 Operating Profit (EBIT) 7190.0 11010.0 11589.0 13210.0 14995.0 Other Income 880.0 1244.0 1505.0 1550.0 1714.0 Interest 39.0 49.0 55.0 53.0 58.0 PBT (Excld Exceptional) 8031.0 12205.0 13040.0 14708.0 16652.0 Provision for Tax 2611.0 3967.0 4197.0 4707.0 5329.0 Profit After Tax 5420.0 8238.0 8843.0 10001.0 11323.0 Exceptional Income / Expenses 1445.0-103.0 0.0 0.0 0.0 Profit After Tax 6865.0 8135.0 8843.0 10001.0 11323.0 PAT Margin % 8.7% 9.4% 9.5% 9.7% 9.9% Source: Company,
Exhibit 3 - Balance Sheet (INR Mn) 6 INR Mn FY15 FY16 FY17 FY18E FY19E EQUITY AND LIABILITIES Share Capital 240.0 240.0 240.0 240.0 240.0 Total Reserves 12176.0 20677.0 26724.0 33309.0 41215.0 Shareholder's Funds 12415.0 20917.0 26964.0 33549.0 41455.0 Minority Interest 24.0 25.0 26.0 25.0 25.0 Capital Subsidy 36.0 41.0 23.0 23.0 23.0 Long-Term Borrowings 433.0 377.0 314.0 330.0 346.0 Deferred Tax Assets / Liabilities -234.0-444.0-231.0-231.0-231.0 Long Term Provisions 57.0 68.0 76.0 76.0 76.0 Other Long Term Liabilities 200.0 213.0 231.0 250.0 250.0 Total Non-Current Liabilities 456.0 255.0 413.0 425.0 441.0 Current Liabilities Short Term Borrowings 969.0 861.0 843.0 885.0 930.0 Trade Payables 7034.0 7691.0 7573.0 8341.0 9154.0 Short Term Provisions 4171.0 2157.0 2268.0 3100.0 3429.0 Other Current Liabilities 2595.0 2589.0 2769.0 3307.0 3657.0 Total Current Liabilities 14769.0 13298.0 13454.0 15634.0 17169.0 Total Liabilities 27700.0 34495.0 40857.0 49655.0 59114.0 ASSETS Non-Current Assets Net Block 7344.0 8343.0 10169.0 12711.0 16525.0 Capital Work in Progress 483.7 900.7 300.7 300.7 300.7 Goodwill 1106.8 1159.1 1278.4 1446.7 1600.0 Non Current Investments 770.6 3726.4 3272.5 3616.8 4000.0 Long Term Loans & Advances 903.5 2746.4 2322.7 2583.4 2857.2 Other Non Current Assets 371.7 378.0 121.2 206.7 228.6 Total Non-Current Assets 10980.0 17254.0 17465.0 20866.0 25511.0 Current Assets Inventories 4049.0 4407.0 6615.0 7610.0 8351.0 Sundry Debtors 1358.0 1706.0 1799.0 1982.0 2192.0 Cash and Bank 2263.0 876.5 1207.6 1630.5 3631.1 Currents Investments 4397.0 4157.0 1749.0 4134.0 4571.0 Short Term Loans and Advances 4652.0 6095.0 12030.0 13434.0 14857.0 Total Current Assets 16720.0 17241.0 23399.0 28789.0 33603.0 Total Assets 27700.0 34495.0 40864.0 49655.0 59114.0 Source: Company,
Exhibit 4 - Cash flow statement (INR Mn) 7 INR Mn FY15 FY16 FY17E FY18E FY19E PBT 9476.0 12102.0 13040.0 14708.0 16652.0 Add: Depreciation 1445.0 1134.0 1193.0 1389.0 1605.0 Add: Interest 39.0 49.0 55.0 53.0 58.0 Cash flow from Operations 5845.0 9736.0 2452.0 10737.0 11829.0 Cash flow from Investing Activity -4509.0-7052.0-5286.0-7616.0-7006.0 Cash flow from Financing Activity -1814.0-4073.0 3166.0-2696.0-2822.0 Net change in Cash (Inflow/Outflow) -478.0-1389.0 332.0 425.0 2001.0 Opening Cash balance 2741.0 2263.0 874.0 1206.0 1630.0 Closing Cash Balance 2263.0 874.0 1206.0 1630.0 3631.0 Source: Company, Exhibit 5 - Ratio Analysis INR Mn FY15 FY16 FY17E FY18E FY19E EPS 45.2 68.7 73.7 83.4 94.4 BV 103.5 174.4 224.8 279.7 345.6 DPS 12.0 20.0 22.9 24.2 24.2 EBITDA Margin (%) 11.0% 14.1% 13.7% 14.1% 14.5% PAT Margin (%) 6.9% 9.6% 9.5% 9.7% 9.9% Net Sales Growth % - 9.8% 15.3% 15.3% 15.3% EBIDTA Growth % - 40.6% 5.3% 14.2% 13.7% PAT Growth % - 52.0% 7.3% 13.1% 13.2% PE (x) 75.7 49.8 46.4 41.0 36.2 Price/BV 33.0 19.6 15.2 12.2 9.9 EV/EBITDA 47.4 33.8 32.1 28.1 24.6 ROE (%) 43.7% 39.4% 32.8% 29.8% 27.3% Debt/Equity 0.11 0.06 0.04 0.04 0.03 Debtors Days 6.3 7.2 7.0 7.0 7.0 Inventory Days 35.9 37.1 49.9 52.0 52.0 Creditors Days 62.3 64.8 57.1 57.0 57.0 Source: Company,
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