Britannia Industries
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
BRIT IN
240
852.7 / 11.4
1/-22/-45
2878
4015 / 2869
28 April 2021
4QFY21 Results Update | Sector: Consumer
CMP: INR3,540
TP: INR4,450 (+26% )
Sales outlook improving; margin disappoints
Buy
Financials & Valuations (INR b)
2021 2022E 2023E
Y/E March
131.4 141.9 161.8
Sales
13.2
8.0
14.0
Sales Gr. (%)
25.1
25.3
29.1
EBITDA
19.1
17.8
18.0
Margins (%)
18.5
18.6
21.4
Adj. PAT
76.8
77.2
88.9
Adj. EPS (INR)
31.0
0.5
15.1
EPS Gr. (%)
147.3 199.5 217.3
BV/Sh.(INR)
Ratios
46.5
44.5
42.7
RoE (%)
29.2
27.4
28.1
RoCE (%)
80.0
80.0
80.0
Payout (%)
Valuations
46.1
45.8
39.8
P/E (x)
24.0
17.7
16.3
P/BV (x)
33.6
32.8
28.4
EV/EBITDA (x)
1.7
1.7
2.0
Div. Yield (%)
BRIT’s 4QFY21 topline growth was in line with volume growth, slightly above
our expectation (7%) at 8%, even as there seems to be some mix
deterioration sequentially. The management said it is seeing healthy growth
momentum in Apr’21 as well.
While deterioration in mix and higher than usual ad spends in 4QFY21 led to
EBITDA miss, the overall commodity basket inflation, at 3%, is not
challenging, as the management reportedly took some price increases
towards the end of 4QFY21.
The structural story for BRIT remains strong, especially aided by: a) direct
reach expansion to ~2.4m outlets (second best after HUVR) and b) further
investment in IT infrastructure as highlighted in 4QFY21. The remarkable
market share improvement for eight consecutive years will continue as the
company widens its moats over peers. Maintain
BUY.
BRIT’s consolidated sales increased 9.2% YoY to INR31.3b
(v/s our estimate
of INR31.6b) in 4QFY21. Standalone sales grew 9.7% YoY to INR29.5b. Base
business volume growth was 8% in 4QFY21 (v/s our expectation of 7%).
Consolidated EBITDA grew 11.3% YoY to INR5.1b (v/s our estimate of
INR5.9b), consolidated PBT grew 7.6% to INR4.9b (v/s our expectation of
INR6b), while consolidated adjusted PAT fell 3.5% to INR3.6b (v/s our
estimate of INR4.7b).
Consolidated gross margin expanded 80bp YoY to 40.5%.
Sudden and steep
inflation in palm oil and milk costs were witnessed.
Lower staff cost (-20bp YoY), as a percentage of sales, and higher other
expenses (+70bp) meant that EBITDA margin expanded 30bp to 16.1%.
There was no disruption to manufacturing and supply chain in Apr’21 and
there has been a surge in demand compared to 4QFY21.
BRIT migrated to: a) the cutting edge S4 Hana ERP, b) Arteria data
management system, and c) a new vendor management system in 4QFY21,
which resulted in a one-off sales impact of ~3 days.
The three IT initiatives will give BRIT an edge over peers with benefits likely
to accrue in a couple of quarters.
Group ICDs remain in the same range as FY20 levels.
While sales were in line with our expectations, margin disappointed due to
mix deterioration and higher-than-expected ad spends. We have reduced
our FY22E/FY23E EPS by ~3% each.
As highlighted in our
upgrade note,
the challenge for BRIT from a base
perspective would only come largely in 1QFY22, with the base becoming far
less challenging in subsequent quarters.
Sales in line, profitability below our expectations
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Mar-21 Dec-20 Mar-20
50.6
50.6
50.6
11.2
10.7
13.4
18.0
17.7
14.7
20.3
21.1
21.3
Highlights from the management commentary
FII Includes depository receipts
Valuation and view
Krishnan Sambamoorthy – Research Analyst
(Krishnan.Sambamoorthy@MotilalOswal.com)
Research Analyst: Dhairya Dhruv
(Dhairya.Dhruv@MotilalOswal.com)/Kaiwan
Jal Olia
(kaiwan.o@motilaloswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.