BUY CMP 1451.00 Target Price 1560.00 BRITANNIA INDUSTRIES LTD Result Update (PARENT BASIS): Q1 FY15 SEPTEMBER 16 th 2014 ISIN: INE216A01022 Index Details Stock Data Sector FMCG (Food) BSE Code 500825 Face Value 2.00 52wk. High / Low (Rs.) 1510.00/720.30 Volume (2wk. Avg.) 12000 Market Cap (Rs. in mn.) 174047.45 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY14A FY15E FY16E Net Sales 63073.90 70012.03 77013.23 EBITDA 6314.40 7226.04 8000.42 Net Profit 3698.30 4405.88 4895.09 EPS 30.83 36.73 40.81 P/E 47.06 39.50 35.56 Shareholding Pattern (%) 1 Year Comparative Graph BRITANNIA INDUSTRIES LTD BSE SENSEX SYNOPSIS Britannia Industries Limited engages in the production and sale of bakery and dairy products in India and internationally. During Q1 FY15, standalone net profit jumps to Rs. 1078.10 mn against Rs. 862.90 mn in Q1 FY14, an increase of 24.94%. Revenue for the quarter rose by 15.39% to Rs. 16342.30 mn from Rs. 14163.10 mn, when compared with the prior year period. EPS of the company stood at Rs. 8.99 a share during the quarter, registering 24.68% increased over previous year period. Profit from operations for the quarter increased by 23.57% to Rs. 1773.50 mn from Rs. 1435.20 mn in the corresponding period of the previous year. Consolidated net profit after taxes, minority interest and share of profit/(loss) of associates of Rs. 1136.60 mn for the quarter ended June 30, 2014 as compared to Rs. 894.90 mn for the quarter ended June 30, 2013. Consolidated Total Income has increased from Rs. 15657.50 mn for the quarter ended June 30, 2013 to Rs. 18085.90 mn for the quarter ended June 30, 2014. Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 28% over 2013 to 2016E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Britannia Industries Ltd 1451.00 174047.45 30.83 47.06 20.39 600.00 Nestle India Ltd 6251.00 602742.80 115.51 54.12 25.45 485.00 Jubilant Foodworks Ltd 1296.75 84908.90 18.25 71.05 15.07 0.00 GlaxoSmithKline Consumer Healthcare 5116.00 215156.10 125.67 40.71 11.87 450.00
QUARTERLY HIGHLIGHTS (PARENT BASIS) Results updates- Q1 FY15, Months Jun-14 Jun-13 % Change Net Sales 16342.30 14163.10 15.39 PAT 1078.10 862.90 24.94 EPS 8.99 7.21 24.68 EBITDA 1773.50 1435.20 23.57 The company s net profit jumps to Rs. 1078.10 million against Rs. 862.90 million in the corresponding quarter ending of previous year, an increase of 24.94%. Revenue for the quarter rose by 15.39% to Rs. 16342.30 million from Rs. 14163.10 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 8.99 a share during the quarter, registering 24.68% increased over previous year period. Profit before interest, depreciation and tax is Rs. 1773.50 million as against Rs. 1435.20 million in the corresponding period of the previous year. Break up of Expenditure Break up of Expenditure Cost of Material Consumed Purchase of Stock in Trade Employee Benefit Expenses Depreciation & Amortization Expense Conversion & Other related Charges Advertisement & Sales Promotion Rs. Million Q1 FY15 Q1 FY14 % Change 8206.00 6648.10 23% 1796.90 1645.30 9% 440.70 486.30-9% 245.50 153.00 60% 1341.70 1167.50 15% 1175.80 1265.30-7% Other Expenditure 1773.00 1573.30 13%
Latest Updates The Consolidated results for the Quarter ended June 30, 2014 The Group has posted a net profit after taxes, minority interest and share of profit/(loss) of associates of Rs. 1136.60 million for the quarter ended June 30, 2014 as compared to Rs. 894.90 million for the quarter ended June 30, 2013. Total Income has increased from Rs. 15657.50 million for the quarter ended June 30, 2013 to Rs. 18085.90 million for the quarter ended June 30, 2014. The Company to dispose off the closed factory land located at Padi, Chennai ( Property ) after negotiations with various prospective buyers, the Company has on July 10, 2014 sold the Property for an amount of Rs. 172 Crores. COMPANY PROFILE Britannia Industries Ltd is Indian company based in Industries Limited is an Indian company based in Kolkata that is famous for its Britannia and Tiger brands of biscuit, which are popular throughout the country. Britannia has an estimated 38% market share. The Company's principal activity is the manufacture and sale of biscuits, bread, rusk, cakes and dairy products. In 1892, Britannia started in a nondescript house in Kolkata with an initial investment of Rs 295. By 1910, with the advent of electricity, mechanized its operations, and in 1921, it became the first company east of the Suez Canal to use imported gas ovens. In 1992, it celebrated its Platinum Jubilee. In 1997, the company unveiled its new corporate identity - "Eat Healthy, Think Better" - and made its first foray into the dairy products market. In 1999, the "Britannia Khao, World Cup Jao" promotion further fortified the affinity consumers had with 'Brand Britannia'. Britannia strode into the 21 st Century as one of India's biggest brands and the pre-eminent food brand of the country. In recognition of its vision and accelerating graph, Forbes Global rated Britannia 'One amongst the Top 200 Small Companies of the World', and The Economic Times pegged Britannia India's 2nd Most Trusted Brand. The brand Britannia is the trust of almost one-third of India's one billion populations and a strong management at the helm on its path of innovation and quality. Britannia is the leading biscuit manufacturer in the Rs. 124 billion Indian bakery market. Its primary business is bakery consisting of biscuits, bread and cakes. The company operates in the dairy segment through its subsidiary Britannia Dairy. The dairy segment comprising of milk, butter, cheese, ghee and curds accounts for 4.7% of Britannia's group turnover.
Products Overview The company's offerings are spread across the spectrum with products ranging from the healthy and economical Tiger biscuits to the more lifestyle-oriented Milkman Cheese. Britannia NutriChoice Oat Cookies Britannia NutriChoice Ragi Cookies Britannia Veg Cakes Nutrichoice Health Starter Kit Britannia NutriChoice 5 Grain Tiger Banana NutriChoice Sugar Out: Litetime, Chocolate cream, and Orange cream NutriChoice Digestive Biscuit Treat Fruit Rollz: Juicy Apple, Strawberry Surprise, Tangy Orange and Delicious Dates New Britannia Milk Bikis Global Presence In March 2007, Britannia Industries Limited formed a Joint Venture with the Khimji Ramdas Group, one of the largest and the most respected business conglomerates in the Middle East. Britannia and its Associates have acquired a significant stake in Dubai based Strategic Food International Co. LLC and Oman based Al Sallan Food Industries Co SAOG. The two companies are key regional players in the biscuits, wafers and cookies segment in the GCC markets and export their products across the world. Strategic Food International Co. LLC (SFIC) is one of the largest biscuit and wafer manufacturing companies in the Middle East. An ISO and HACCP certified company. SFIC is also a proud winner of the Dubai Quality Appreciation Certificate. It offers a wide spectrum of products under the brand Nutro, which is a leading biscuit brand in the Middle East. Al Sallan Food Industries Co is one of the foremost companies for the production of cookies, rolls and chocolates. The products are well known under the brand name of Baker's Pride.
FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance sheet as at March 31, 2013 to 2016E SOURCES OF FUNDS Shareholder's Funds FY13A FY14A FY15E FY16E Share Capital 239.10 239.90 239.90 239.90 Reserves and Surplus 6125.00 8294.70 9787.75 11255.91 1. Sub Total - Net worth 6364.10 8534.60 10027.65 11495.81 2. Share application money pending allotment 22.90 0.00 0.00 0.00 3. Capital subsidy 48.20 42.80 0.00 0.00 Non Current Liabilities Long Term Borrowings 4.10 3.40 3.13 2.97 Deferred Tax Liabilities 136.20 91.60 78.78 70.90 Other Long term Liabilities 191.80 187.70 195.21 201.06 Long Term Provisions 0.00 0.00 0.00 0.00 4. Sub Total - Non Current Liabilities 332.10 282.70 277.11 274.93 Current Liabilities Short Term Borrowings 1892.40 0.00 0.00 0.00 Trade Payables 3336.10 4846.80 5622.29 6184.52 Other Current Liabilities 2104.90 1483.70 1157.29 983.69 Short Term Provisions 2729.60 3253.80 3579.18 3829.72 5. Sub Total - Current Liabilities 10063.00 9584.30 10358.75 10997.93 Total Liabilities (1+2+3+4+5) 16830.30 18444.40 20663.51 22768.67 APPLICATION OF FUNDS Non-Current Assets Fixed Assets Tangible assets 4377.60 5298.10 6039.83 6764.61 Intangible assets 139.20 158.50 177.52 193.50 Capital Work in Progress 1284.40 972.20 1069.42 1160.32 a) Sub Total - Fixed Assets 5801.20 6428.80 7286.77 8118.43 b) Non-current investments 2341.00 2289.50 2472.66 2621.02 c) Long Term Loans and Advances 1413.10 1004.30 1094.69 1160.37 d) Other Non-current Assets 121.20 121.20 128.47 134.90 1. Sub Total Non Current Assets 9676.50 9843.80 10982.59 12034.72 Current Assets Current Investment 455.00 1440.40 1728.48 2039.61 Inventories 3314.90 3668.60 4035.46 4317.94 Trade receivables 771.20 536.90 601.33 655.45 Cash and Bank Balances 644.80 657.80 703.85 746.08 Short-terms loans & advances 1967.90 2296.90 2611.81 2974.89 2. Sub Total - Current Assets 7153.80 8600.60 9680.92 10733.96 Total Assets (1+2) 16830.30 18444.40 20663.51 22768.67
Annual Profit & Loss Statement for the period of 2013 to 2016E Value(Rs.in.mn) FY13A FY14A FY15E FY16E Description 12m 12m 12m 12m Net Sales 56154.90 63073.90 70012.03 77013.23 Other Income 554.70 348.20 504.89 530.13 Total Income 56709.60 63422.10 70516.92 77543.37 Expenditure -52439.60-57107.70-63290.87-69542.95 Operating Profit 4270.00 6314.40 7226.04 8000.42 Interest -377.40-54.40-10.88-9.79 Gross profit 3892.60 6260.00 7215.16 7990.63 Depreciation -570.80-633.80-811.26-908.62 Exceptional Items 0.00-200.00 0.00 0.00 Profit Before Tax 3321.80 5426.20 6403.90 7082.01 Tax -983.10-1727.90-1998.02-2186.92 Net Profit 2338.70 3698.30 4405.88 4895.09 Equity capital 239.10 239.90 239.90 239.90 Reserves 6125.00 8294.70 9787.75 11255.91 Face value 2.00 2.00 2.00 2.00 EPS 19.56 30.83 36.73 40.81 Quarterly Profit & Loss Statement for the period of 31 st Dec, 2013 to 30 th Sep, 2014E Value(Rs.in.mn) 31-Dec-13 31-Mar-14 30-Jun-14 30-Sep-14E Description 3m 3m 3m 3m Net sales 16280.30 16530.50 16342.30 18303.38 Other income 56.40 114.20 195.70 176.13 Total Income 16336.70 16644.70 16538.00 18479.51 Expenditure -14794.00-14884.10-14764.50-16546.25 Operating profit 1542.70 1760.60 1773.50 1933.25 Interest -5.70-3.80-2.80-1.82 Gross profit 1537.00 1756.80 1770.70 1931.43 Depreciation -160.20-164.00-245.50-230.77 Exceptional Items 0.00-200.00 0.00 0.00 Profit Before Tax 1376.80 1392.80 1525.20 1700.66 Tax -413.50-477.50-447.10-530.61 Net Profit 963.30 915.30 1078.10 1170.06 Equity capital 239.90 239.90 239.90 239.90 Face value 2.00 2.00 2.00 2.00 EPS 8.03 7.63 8.99 9.75
Ratio Analysis Particulars FY13A FY14A FY15E FY16E EPS (Rs.) 19.56 30.83 36.73 40.81 EBITDA Margin (%) 7.60% 10.01% 10.32% 10.39% PBT Margin (%) 5.92% 8.60% 9.15% 9.20% PAT Margin (%) 4.16% 5.86% 6.29% 6.36% P/E Ratio (x) 74.17 47.06 39.50 35.56 ROE (%) 36.75% 43.33% 43.94% 42.58% ROCE (%) 58.60% 81.38% 80.13% 77.48% Debt Equity Ratio 0.30 0.00 0.00 0.00 EV/EBITDA (x) 40.81 27.23 23.75 21.41 Book Value (Rs.) 53.23 71.15 83.60 95.84 P/BV 27.26 20.39 17.36 15.14 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs.1451.00, the stock P/E ratio is at 39.50 x FY15E and 35.56 x FY16E respectively. Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.36.73 and Rs.40.81 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 28% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 23.75 x for FY15E and 21.41 x for FY16E. Price to Book Value of the stock is expected to be at 17.36 x and 15.14 x respectively for FY15E and FY16E. We recommend BUY in this particular scrip with a target price of Rs. 1560.00 for Medium to Long term investment. INDUSTRY OVERVIEW Bakery The Company s bakery business constitutes of biscuits, cake, bread and rusk. Biscuit is estimated to be the largest ready to eat food business in India growing at 12%-14% over last three years. This has attracted interest from both foreign and national players. The additional marketing activity has only led to more visibility for the category and helped maintain the growth momentum. Despite its large size, per capita consumption of biscuits in India has been low when compared to even our Asian neighbours. Thus, increased consumption and upgrade across the rungs of the price ladder will be the primary source of growth for Biscuits. Cake and Rusk are comparatively less developed categories since a majority of the players are local entrepreneurs and the products are more basic than say biscuits. In recent times large Indian companies have shown interest in these segments but the Company continues to be the largest and in many parts of the country the only national player. Bread on account of its relatively low shelf life is a category with localized production reaching the proximate market. The Company while being the largest national player typically encounters local competition. The year has been challenging for the overall economy and towards the end of the fiscal year bakery categories began to feel the impact with growth slowing down to high single digits.
Dairy India remains the largest milk producing and consuming market in the world. Milk prices registered significant inflation during the year, impacted by increased cattle feed costs at a domestic level as well as external economic and regulatory factors. While liquid milk consumption continues to drive the industry, there has been a significant shift in the dynamics of the value added segment of dairy with access to milk, portfolio strategies and increasing investments determining the right to succeed. Meanwhile, the dairy industry continues to benefit from an array of factors including increased per capita income driving the need for value added products, economic activity on the rise in the metro cities and the emergence of modern format retail with increased emphasis on cold chain infrastructure. A premium on time with the emergence of nuclear families is creating a need for products that are convenient yet safe and traditional. Accessibility, increased competition and launch of new products in the value added space are all resulting in increased options for the Indian consumer. The dairy industry is developing along four trends that include -(i) Cooperatives modernizing with products which are gold standard and seeking a dominant presence, (ii) Regional private players looking to go national and investing in both brand building and capacity, (iii) Emerging regional players with limited portfolio and (iv) International Dairy companies looking to invest into the Indian market. The Value Added Dairy Industry in the coming years is expected to witness increased competitive play and significant investments with an emphasis on offering the consumer superior and differentiated products. Outlook In the near term it is expected that the economic conditions will not change significantly. Britannia estimates industry growth to be 8%-10% which is lower than growth rates of earlier years. While this presents a revenue challenge, Company expects to be challenged on the cost front on account of commodity prices and in some case even by regulatory environment in areas such as excise and depreciation. In this environment, Company will focus on the fundamental building blocks of business viz. width / depth and quality of distribution, efficiency in operations, consistent and high product quality, aggressive support for its brands and nurturing a strong and cohesive team to achieve faster than market and profitable growth.
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