Britannia Industries
BSE SENSEX
31,159
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
9,625
BRIT IN
120.0
410.1/6.1
3796/2524
-10/-4/8
597
49.3
30 May 2017
4QFY17 Results Update | Sector: Consumer
CMP: INR3,419 TP: INR4,050(+18%)
Sales broadly in-line; margins far better than expectations
Buy
Financials & Valuations (INR b)
2017 2018E 2019E
Y/E Mar
89.6 101.5 118.7
Net Sales
11.9
13.2
16.4
EBITDA
8.8
9.8
12.2
PAT
73.7
82.1 101.3
EPS (INR)
7.3
11.4
23.4
Gr. (%)
224.7 242.0 302.1
BV/Sh (INR)
36.9
35.2
37.2
RoE (%)
31.1
29.2
31.5
RoCE (%)
46.4
41.7
33.7
P/E (x)
15.2
14.1
11.3
P/BV (x)
Estimate change
TP change
Rating change
BRIT’s consol. sales grew 5.2% YoY
(est. of +7%) in 4QFY17. Standalone sales
rose 6.6% YoY, but subsidiary sales fell 11% YoY, likely due to weak
performance in the Middle East. Biscuits volume growth was 2% (est. of +3%),
but this was on a base of 10% growth in 4QFY16. EBITDA grew 6.1% YoY (est. of
-4.2%) to INR3.1b. Adj. PAT grew 5.9% YoY (est. of -3.3%) to INR2.1b.
Consol. gross margin contracted 160bp YoY
(est. of -260bp) to 38% due to
commodity cost inflation. There was a decrease in other expenses by 170bp
YoY to 20.3% and in staff costs by 10bp YoY. Consol. EBITDA margin thus
expanded 10bp to 13.7% (est. of 11.4%) in 4QFY17.
Standalone performance:
Sales, EBITDA and adj. PAT grew 6.6%, 7.2% and
2.5% YoY, respectively, in 4QFY17. Gross margin of 37.8% contracted 150bp
YoY, while operating margin of 13.7% expanded 10bp YoY.
FY17 performance:
Consolidated sales grew 7.5% YoY to INR89.8b. PAT rose
7.3% YoY to INR8.8b. Gross margin shrunk 220bp YoY, but EBITDA margin
contraction was restricted to 60bp to 13.3%.
Concall highlights:
(1) Cost savings were INR1.55b in FY17. For FY18, cost
savings are likely to be 40% higher than FY17. (2) Direct reach increase of 2x in
three years to 1.55m outlets is aiding consistent market share growth.
Valuation and view:
We are enthused with the consistent healthy performance
in a difficult operating environment. With continuing investments in R&D, own
manufacturing facilities and potential strategic tie-ups (leveraging on its
consistently improving distribution and marketing skills), we are positive on the
company finding additional levers of growth. We retain
Buy
with a target price
of INR4,050 (40x FY19 EPS, 15% premium to three-year average).
(INR Million)
Quarterly Performance
Y/E March
Base business volume growth (%)
Net Sales
YoY Cha nge (%)
COGS
Gross Profit
Ma rgi ns (%)
Other Opera ti ng Exp
% of Sa l es
EBITDA
Ma rgi ns (%)
YoY Growth (%)
Depreci a ti on
Interes t
Other Income
PBT
Ta x
Ra te (%)
Adjusted PAT
YoY Cha nge (%)
1Q
9.0
19,411
11,587
7,824
40.3
5,102
26.3
2,722
14.0
274
7
401
2,842
906
31.9
1,936
FY16
2Q
3Q
11.0
13.0
21,277 21,444
12,717
8,560
40.2
5,492
25.8
3,068
14.4
272
15
506
3,287
1,076
32.7
2,211
12,945
8,499
39.6
5,554
25.9
2,945
13.7
281
12
481
3,134
1,027
32.8
2,107
4Q
10.0
21,337
12,878
8,459
39.6
5,557
26.0
2,903
13.6
308
15
362
2,942
952
32.4
1,990
E: MOSL Estimates
1Q
10.0
21,063
8.5
12,879
8,184
38.9
5,367
25.5
2,817
13.4
3.5
279
15
739
3,263
1,071
32.8
2,192
13.2
FY17
2Q
3Q
10.0
2.0
23,612 22,648
11.0
5.6
14,902 14,190
8,709
8,458
36.9
37.3
5,578
5,504
23.6
24.3
3,131
2,954
13.3
13.0
2.0
0.3
289
303
15
11
670
561
3,496
3,201
1,156
997
33.1
31.1
2,340
2,204
5.8
4.6
4Q
2.0
22,444
5.2
13,915
8,528
38.0
5,448
24.3
3,081
13.7
6.1
322
13
335
3,081
973
31.6
2,108
5.9
FY16
10.8
83,470
50,127
33,343
39.9
21,705
26.0
11,638
13.9
1,134
49
1,750
12,205
3,961
32.5
8,244
FY17
6.0
89,766
7.5
55,887
33,879
37.7
21,897
24.4
11,983
13.3
-4.3
1,193
55
2,305
13,040
4,197
32.2
8,843
7.3
FY17 Variance
4QE
(%)
3.0
22,657
(0.9)
7.3
14,410
8,247
3.4
36.4
5,673
25.0
2,575
19.7
11.4
-4.2
318
15
552
2,794
10.3
870
31.1
1,924
9.5
-3.3
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Krishnan Sambamoorthy
(Krishnan.Sambamoorthy@MotilalOswal.com); +91 22 3982 5428
Vishal Punmiya
(Vishal.Punmiya@MotilalOswal.com); +91 22 3980 4261

Britannia Industries
Exhibit 1: BRIT’s base business volumes grew 2% in 4QFY17
BRIT's base business volume growth (%)
13
11
11
10
9
8
7
7
3
4
4
10
10
6
2
2
Source: Company, MOSL
Exhibit 2: Company witnessed 10% commodity cost inflation in 4QFY17
Source: Nielsen data, BRIT presentation
Conference call highlights
Distribution reach, market share and top line growth
Volume growth in base business was 2% in 4QFY17.
2x increase in direct reach Rs(700,000 outlets to 1.55m outlets) over the past
three years has enabled them to grow ahead of the market.
Total outlets reached 4.5m compared to 5.8 of Parle. Direct reach for BRIT is
however 2x that of Parle.
Britannia continues to gain value market share in FY17 as well.
Hinterland states sales growth in FY17- Gujarat 23%, Raj 20%, MP 13% and UP
9%. In UP, Good Day has witnessed good growth.
Bread sales are gradually recovering by 4QFY17 from Potassium Bromate issue
earlier.
Dairy- The company focused only on more profitable segment due to
commodity cost inflation.
Premium cookies (Good Day 3/4th of category) is growing at a healthy pace.
Health Category (Nutrichoice) is doing well on the growth front.
Value category is still declining YoY.
2
30 May 2017

Britannia Industries
Very difficult to call out timeline for revival of MENA business due to uncertain
operating environment.
Material costs and margins
At the moment when category growth is low management is looking to maintain
margins.
Flour costs up 11% YoY, Sugar 34% YoY, refined palm oil 16% YoY, milk 23% up
YoY in 4QFY17.
Last year INR 1.55b cost savings, 40% higher targeted in FY18.
Higher inventory due was to opportunistic buying of commodities. Will
normalize by September.
Not implementing any price increases before GST implementation.
May need 4% price increase to maintain gross margins.
New ventures
Chipita JV- First product will be Long Life filled croissants to be commercialized
by June 2018. Enables them to attract young population. In some countries
Croissants is as large as the biscuits category. Croissants can be an anytime
Snack.
Chipita is a 60:40 JV. Its factory will be next to Britannia factory at Perundurai in
Tamil Nadu. Targeting INR 2b turnover in 3 years. Capex will be around INR800-
850m.
Britannia is also making a foray into Nepal.
Launching new products through use of new technologies.
GST
There will be some disruption on account of GST implementation.
18% will be a neutral rate.
Financials
ICD at the end of FY17 was at the same level as FY16, reduced since then by
around INR 400m.
Adspend FY17 v/s FY16 down 13% YoY.
In 4QFY17, A&P was down 20-22%. Did not have Filmfare award in 4QFY17 and
did not advertise in IPL as well.
INR 340m group charges (~0.4% of sales) in FY17.
Loans and advances were up due to advances for plant in Maharashtra INR 1bn.
Maharashtra will have a full-fledged food park with all key categories.
FY18 capex will be INR 3.5b-4b including Chipita JV.
Valuation and view
We are enthused with the consistent healthy performance in a difficult
operating environment. With continuing investment in R&D and its own
manufacturing facilities as well as potential strategic tie-ups leveraging on its
consistently improving distribution/marketing skills, we are positive on the
company finding additional levers of growth in the future.
We retain
Buy
with a target price of INR 4,050 (40x FY19 EPS, 15% premium to
three-year average).
3
30 May 2017

Britannia Industries
Exhibit 3: We change FY18/FY19 EPS marginally
Change in
Estimates
Net Sales
EBITDA
Adjusted PAT
New
FY18E
101,522
13,171
9,848
FY19E
118,726
16,418
12,157
FY18E
102,645
13,246
10,000
Old
FY19E
119,564
16,543
12,202
Change
FY18E
FY19E
-1.1%
-0.7%
-0.6%
-0.8%
-1.5%
-0.4%
Source: Company, MOSL
Exhibit 4:
Britannia
P/E (x)
50.0
38.0
26.0
14.0
2.0
15.0
27.3
PE (x)
Peak(x)
Avg(x)
45.3
Min(x)
41.4
Exhibit 5: Britannia P/E premium vs. Sensex
150
100
50
0
-50
Britannia PE Relative to Sensex PE (%)
LPA (%)
58.1
125.0
Source: Company, MOSL
Source: Company, MOSL
Exhibit 6: Valuation matrix of coverage universe
Company
Consumer
Asian Paints
Britannia
Colgate
Dabur
Emami
Godrej Consumer
GSK Consumer
Hind. Unilever
ITC
Jyothy Labs
Marico
Nestle
P & G Hygiene
Page Industries
Parag Milk Foods
Pidilite Inds.
United Breweries
United Spirits
Retail
Jubilant Foodworks
Titan Company
Reco
Neutral
Buy
Buy
Neutral
Buy
Neutral
Sell
Buy
Buy
Neutral
Neutral
Sell
Buy
Buy
Neutral
Neutral
Neutral
Neutral
Sell
Neutral
Price
(INR)
1,159
3,419
1,012
278
1,082
1,857
5,325
1,071
310
367
315
6,605
7,454
14,222
238
765
789
2,090
909
469
Mkt Cap
(USD M)
17.0
6.4
4.3
7.6
3.8
9.6
3.5
35.9
59.4
1.0
6.3
9.9
3.7
2.5
0.3
6.0
3.2
4.5
1.0
6.5
EPS Growth YoY (%)
FY17 FY18E FY19E
8.7
7.3
-5.7
1.9
4.5
12.4
0.9
1.9
9.4
175.7
12.1
-1.6
11.5
15.0
-46.4
6.7
-23.0
71.2
-32.1
18.5
10.0
11.4
20.8
6.7
10.2
15.4
8.7
14.3
14.1
-20.4
10.5
0.6
7.5
31.5
92.8
10.2
11.6
47.2
21.6
13.8
18.6
23.4
21.1
18.3
18.6
14.6
9.3
15.3
19.6
22.4
21.1
17.6
16.6
27.4
79.4
14.8
51.9
39.1
47.4
18.2
P/E (x)
EV/EBITDA (x)
ROE (%) Div. (%)
FY17 FY18E FY19E FY17 FY18E FY19E FY17
FY17
55.1
46.4
47.6
38.4
40.8
49.1
34.1
54.5
37.0
32.6
50.1
56.0
51.4
59.6
66.1
45.7
90.8
73.0
90.8
52.0
50.1
41.7
39.4
36.0
37.0
42.6
31.4
47.7
32.4
41.0
45.3
55.7
47.8
45.3
34.3
41.5
81.3
49.6
74.7
45.7
42.2
33.7
32.6
30.4
31.2
37.2
28.7
41.4
27.1
33.5
37.4
47.3
41.0
35.6
19.1
36.1
53.6
35.6
50.7
38.6
35.6
34.1
29.0
30.8
32.5
33.9
23.2
37.5
25.5
27.8
35.5
34.3
34.6
37.1
21.0
29.9
33.1
34.0
25.1
35.6
32.1
30.1
24.0
29.3
28.4
29.2
21.5
33.0
22.6
24.0
32.2
33.3
30.2
29.2
15.4
26.4
33.9
27.2
21.6
31.2
27.0
23.8
20.0
24.6
23.9
25.7
19.1
28.6
18.8
20.6
26.8
28.2
25.5
23.0
10.7
22.6
25.9
21.1
16.8
26.2
28.5
36.9
50.4
28.4
35.8
24.6
22.2
65.6
23.5
21.1
36.7
39.0
45.3
40.0
5.8
28.2
10.4
20.8
8.2
20.6
1.0
0.6
1.0
0.9
0.6
0.6
1.0
1.6
1.8
1.6
1.0
1.0
4.9
0.6
0.0
0.6
0.1
0.0
0.3
0.6
Note: For Nestle FY16 means CY15
Source: Company, MOSL
30 May 2017
4

Britannia Industries
Financials and valuations
Income Statement
Y/E March
Net Revenues
Change (%)
Raw Material Cost
Gross Profit
Margin (%)
Advertising
% of Sales
Other Expenditure
EBITDA
Change (%)
Margin (%)
Depreciation
Int. and Fin. Charges
Financial Other Income
Operating Other Income
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Margin (%)
Non-rec. (Exp.)/Income
Reported PAT
Balance Sheet
Y/E March
Share Capital
Reserves
Networth
Loans
Capital Employed
Gross Block
Less: Accum. Depn.
Net Fixed Assets
Goodwill on consolidation
Capital WIP
Investments
Deferred Liability
Currents Assets
Inventory
Account Receivables
Cash and Bank Balance
Others
Curr. Liab. & Prov.
Account Payables
Other Liabilities
Provisions
Net Current Assets
Net Assets
E: MOSL Estimates
2014
68,293
11.3
41,710
26,583
38.9
6,037
8.8
15,108
5,438
46.5
8.0
832
83
336
834
5,693
1,775
30.5
3,957
52.3
5.8
0
3,953
2014
240
7,698
7,938
1,498
9,503
14,930
-7,524
7,406
1,070
1,071
1,979
89
9,543
4,203
1,087
1,091
3,163
11,477
5,567
3,799
2,111
-1,934
9,503
2015
77,751
13.8
46,918
30,833
39.7
6,517
8.4
16,510
7,806
43.5
10.0
1,445
39
880
833
8,035
2,553
28.5
5,743
45.1
7.4
1,142
6,886
2015
240
12,176
12,415
1,451
13,926
16,065
-8,731
7,334
1,107
484
5,179
-234
13,596
4,040
1,358
2,263
5,934
14,007
7,034
4,273
2,700
-411
13,926
2016
83,254
7.1
50,127
33,127
39.8
4,562
5.5
17,139
11,426
46.4
13.7
1,134
49
1,244
718
12,205
3,967
32.5
8,244
43.6
9.9
0
8,246
2016
240
20,677
20,917
1,345
22,315
18,142
-9,799
8,343
1,159
901
7,529
-440
16,702
4,407
1,706
877
9,713
12,760
7,691
1,795
3,274
3,943
22,314
2017
89,623
7.6
55,887
33,736
37.6
4,660
5.2
17,212
11,864
3.8
13.2
1,193
55
1,505
918
13,040
4,019
32.2
8,843
7.3
9.9
0
8,848
2017
240
26,724
26,964
1,157
28,147
21,197
-10,991
10,205
1,278
301
6,082
-231
22,990
6,615
1,792
1,208
13,376
12,941
7,573
1,871
3,497
10,049
28,147
2018E
101,522
13.3
63,357
38,166
37.6
5,584
5.5
19,411
13,171
11.0
13.0
1,581
56
2,008
940
14,482
4,634
32.0
9,848
11.4
9.7
0
9,848
2018E
240
28,803
29,043
1,073
30,116
24,697
-12,573
12,124
1,278
301
9,082
-231
23,240
5,076
2,162
6,374
9,627
16,140
9,145
2,523
4,472
7,100
30,116
(INR Million)
2019E
118,726
16.9
73,155
45,572
38.4
6,530
5.5
22,624
16,418
24.7
13.8
1,826
56
2,348
994
17,878
5,721
32.0
12,157
23.4
10.2
0
12,157
(INR Million)
2019E
240
36,016
36,256
997
37,253
28,197
-14,399
13,798
1,278
301
12,082
-231
28,032
7,124
2,498
8,388
10,022
18,470
10,092
2,920
5,458
9,563
37,253
30 May 2017
5

Britannia Industries
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
EV/Sales
EV/EBITDA
P/BV
Dividend Yield
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Debtor (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
Cash Flow Statement
Y/E March
OP Profit
Dep
Financial Other Income
Interest Paid
Direct Taxes Paid
Inc in WC
CF from Operations
Extraordinary Items
(Inc)/Dec in FA
(Pur.)/Sale of Investments
Other Non Rec Exp
CF from Investments
Issue of Shares
Inc in Debt
Dividend Paid
Other Item
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
2014
33.0
66.2
12.0
36.4
1.45111
2015
47.9
103.5
16.0
33.4
2016
68.7
174.3
20.0
29.1
49.8
4.8
35.3
19.6
0.6
58.9
40.0
57.3
6
7.2
0.2
56.4
43.9
80.0
6
5.6
0.1
49.5
41.0
73.1
7
3.7
0.1
2017
73.7
224.7
22.0
29.9
46.4
4.5
34.1
15.2
0.6
36.9
31.1
43.1
7
3.2
0.0
2018E
82.1
242.0
28.7
35.0
41.7
3.9
30.1
14.1
0.8
35.2
29.2
45.1
8
3.4
0.0
2019E
101.3
302.1
35.5
35.0
33.7
3.3
23.8
11.3
1.0
37.2
31.5
64.3
8
3.2
0.0
(INR Million)
2019E
17,878
1,826
-2,348
-56
5,721
449
11,242
2014
5,693
832
-336
-83
1,775
-1,602
6,099
2015
8,035
1,445
-880
-39
2,553
350
5,736
2016
12,205
1,134
-1,244
-49
3,967
5,741
2,437
2017
13,040
1,193
-1,505
-55
4,019
5,775
2,988
2018E
14,482
1,581
-2,008
-56
4,634
-8,116
17,593
-1,634
-897
0
-2,531
1
-2,302
1,189
15
-3,506
62
1,029
1,091
-548
-3,201
-1,142
-4,891
0
-47
1,684
-2,058
327
1,172
1,091
2,263
-2,494
-2,349
0
-4,844
0
-106
2,309
-3,435
1,020
-1,387
2,263
876
-2,455
1,446
0
-1,009
0
-187
2,888
-1,427
-1,648
331
877
1,207
-3,500
-3,000
0
-6,500
0
-84
3,072
2,769
-5,926
5,167
1,208
6,374
-3,500
-3,000
0
-6,500
0
-76
4,005
-1,353
-2,728
2,014
6,374
8,388
30 May 2017
6

Britannia Industries
Corporate profile
Company description
Exhibit 1: Sensex rebased
Britannia is the market leader in the biscuits category
(value market share of ~33%). Biscuits contribute over
85% of Company’s consolidated revenue. Over the
years, the company has forayed into other bakery
items and dairy products (constituting ~15% of
consolidated revenues). The company enjoys strong
brand equity and has been consistently ranked
amongst the top food brand in India. Britannia is
promoted by Wadia group that has diversified
interests ranging from real estate, textiles, chemicals
and airlines business.
Exhibit 2: Shareholding pattern (%)
Mar-17
Promoter
DII
FII
Others
50.7
11.7
16.0
21.6
Dec-16
50.7
11.0
17.4
20.9
Mar-16
50.7
20.8
6.5
22.0
Source: Capitaline
Source: MOSL/Bloomberg
Exhibit 3: Top holders
Holder Name
Arisaig Partners (Asia) Pte Ltd. A/C Arisaig
Indiafund Limited
Life Insurance Corporation Of India
Icici Prudential Value Fund - Series 4
General Insurance Corporation Of India
% Holding
2.9
2.6
1.7
1.0
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
Nusli N Wadia
Varun Berry
Rajesh Arora
Designation
Chairman
Managing Director
Company Secretary
Exhibit 5: Directors
Name
A K Hirjee
Avijit Deb
Keki Dadiseth
Ness N Wadia
Ranjana Kumar
Vijay L Kelkar
Name
Ajai Puri
Jeh N Wadia
Nasser Munjee
Nimesh N Kampani
S S Kelkar
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
BSR & Co LLP
N I Mehta & Co
Type
Statutory
Cost Auditor
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY18
FY19
MOSL
forecast
82.1
101.3
Consensus
forecast
87.9
101.6
Variation (%)
-6.6
-0.3
Source: Bloomberg
Source: Capitaline
30 May 2017
7

Disclosures
Britannia Industries
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Disclosure of Interest Statement
Analyst ownership of the stock
Served as an officer, director or employee
Britannia Industries
No
No
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