ShareTipsInfo.com presents research on Britannia Industries:
Company overview:
Britannia had a very humble start from a nondescript house in Calcutta in 1892.Later in the year 1913 it got incorporated as public limited company.
Britannia is ranked as one of the biggest brand of the country. It is the number one food brand. It has market share of about 40% in the bakery segment and is the leader.
Product:
- BISCUIT: Britannia Good Day(cashew, butter,pista,badam,chocochips and choconuts), Nice Time, Marie Gold, Tiger, Britannia Treat (elaichi, orange, mango), Milk Bikis, Little Heart, Britannia 50-50, Salted Crackers-Snax, Imepass
- OTHER: Delbis (slice bread), Milk, Cheese, Cakes
Sales mix:
Recent development that will unlock the valuation:
Two year dispute between Wadia Group and French food major Danone came to an end over the control of Biscuit major Britannia Industries. Both parties have reached an agreement under which Danone will sell its 25.48% stake to Wadias and exit Britannia.
The development seems to be positive for Britannia as if now the Wadias will be able to take strategic decision with ease. The future course could be charted without any hurdle. Britannia could explore many new related business which are growing at rapid pace like mineral water, fruit juice and dairy product.
Danone exit won’t hamper the growth of Britannia as for past couple of years Danone was not providing any technical assistance because of dispute over the control. Danone itself has exited the biscuit business by selling its worldwide biscuit business to Kraft.
Danone if enters Indian market on its own it won’t be any direct threat to Britannia as Danone is more known for Baby food product and Dairy product. Its coming to India could be a threat to Nestle and Amul rather than Britannia.
Investment rational:
- At current price stock is trading at PE multiple of 16x while industry average is 22x.
- Strong brand and leadership position in the bakery product.
- The increasing utilization of Baddi facility for manufacturing high end product is reducing the excise burden.
- The power brand (Tiger, 50:50, Marie Gold, Good Day) are showing double digit growth.
- Defensive sector.
- The ownership battle coming to an end will help the company move into next phase of growth.
- Stock underperformance as compared to the peers could be attributed to its low liquidity. Now ownership row solved we could see bonus and split in the coming months.
- We feel the price for 25.48% stake could be somewhere near Rs1000crore. This could be at premium of 25% from the current market price.
SHAREHOLDING PATTERN:
|
|
|
NO. OF SHARES |
% OF TOTAL |
|
PROMOTERS |
12173969 |
|
50.96% |
|
INSTITUTION |
7163785 |
|
29.99% |
|
GENERAL PUBLIC |
4552409 |
|
19.06% |
|
GRAND TOTAL |
23890163 |
|
100.00% |
FINANCIAL:
|
|
|
31/03/05 |
31/03/06 |
31/03/07 |
31/03/08 |
|
TOTAL INCOME |
1694.6 |
1839.6 |
2346.4 |
2667.9 |
|
EXPENDITURE |
-1431.5 |
-1620 |
-2191.9 |
-2389.2 |
|
OPERATING PROFIT |
263.1 |
219.6 |
154.5 |
278.7 |
|
DEPRECIATION |
-19 |
-21.7 |
-25.3 |
-29.1 |
|
PBIT |
|
244.1 |
197.9 |
129.2 |
249.6 |
|
INTEREST |
|
-2.1 |
-2.1 |
-5.4 |
-6.4 |
|
PBT |
|
242 |
195.8 |
123.8 |
243.2 |
|
TAX |
|
-71.4 |
-54.3 |
-10.8 |
-41.3 |
|
EXTRA ORD ITEM |
-21.8 |
4.9 |
-5.4 |
-10.9 |
|
PAT |
|
148.8 |
146.4 |
107.6 |
191 |
CHANGE IN TOTAL INCOME: CAGR IN TOTAL INCOME IS 16.3%.
CHANGE IN OPERATING INCOME: CAGR IN OPERATING INCOME IS 1.93%.
CHANGE IN NET PROFIT: CAGR IN NET PROFIT IS 8.67%.
KEY HIGHLIGHTS:
- INCOME GREW AT CAGR OF 16.3%.
- OPERATING PROFIT GREW AT CAGR OF 1.93%. THIS LOW GROWTH IS DUE TO THE RISING COST OF INPUT AND THE COMPANIES INABILITY TO PASS THE PRICE TO THE CONSUMERS.
- NET PROFIT INCREASED AT RATE OF 8.675.
RATIOS:
|
|
|
31/03/05 |
31/03/06 |
31/03/07 |
31/03/08 |
|
|
EPS |
62.25941 |
61.25523 |
45.02092 |
79.91632 |
|
|
OPM |
15.52579 |
11.93738 |
6.584555 |
10.44642 |
|
|
NPM |
8.780833 |
7.958252 |
4.585748 |
7.159189 |
|
INTEREST COVER |
116.2381 |
94.2381 |
23.92593 |
39 |
KEY HIGHLIGHTS:
- EPS INCREASED FROM Rs62.2 IN 2005 TO Rs79.1 IN 2008 AT CAGR OF 8.67%.
- OPM DECLINED IN LAST 4 YEARS FROM 15% TO 10%. THIS IS DUE TO THE RISING COST OF INPUTS.
- NPM REMAINED ALMOST FLAT OVER THE PERIOD AT 8%.
- INTEREST COVERAGE IS GOOD AT 39 THOUGH IT DECLINED FROM 116 TO 39.
COMAPRISION OF Q3FY2009 WITH Q3FY2008:
|
|
|
31/12/07 |
%CHANGE |
31/12/08 |
|
TOTAL INCOME |
669.7 |
24.70% |
|
835.31 |
|
EXPENDITURE |
-604.6 |
|
|
-762.35 |
|
OPERATING INCOME |
65.1 |
12.07% |
|
72.96 |
|
DEPRECIATION |
-7.3 |
|
|
-8.59 |
|
PBIT |
|
57.8 |
|
|
64.37 |
|
INTEREST |
|
-3 |
|
|
-3 |
|
PBT |
|
54.8 |
|
|
61.37 |
|
TAX |
|
-5.7 |
|
|
-8.79 |
|
PAT |
|
49.1 |
7.53% |
|
52.58 |
KEY HIGHLIGHTS:
- TOTAL INCOME SURGED BY 24.7% IN Q3 OF FY2009 AS COMPARED TO Q3FY2008.
- OPERATING INCOME UP BY 12.07%.
- NET PROFIT UP BY 7.53%.
Valuation:
At current market price of Rs1447, the stock is trading at PE multiple of 17x on trailing twelve month EPS of Rs84. The PE industry average of FMCG Company is more than 22x. If we value the stock at 22x the fair price come at around Rs1848. Another upside could be seen because of clarity on the ownership structure.
We also expect the dividend payout ratio to increase in the coming year as the acquisition is financed by debt.
Conclusion:
We expect at least 25-30% gain from the current level in period of 6 months time.
