Britannia (Q1 FY14)
India Infoline News Service | Mumbai |
Britannia’s standalone Q1 FY14 revenues matched our expectations by recording 14.9% yoy growth at Rs14bn driven by healthy volume growth, price hikes and premiumisation
CMP Rs748, Target Rs831, Upside 11.1%
Source: Company, India Infoline Research
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Britannia’s standalone Q1 FY14 revenues matched our expectations by recording 14.9% yoy growth at Rs14bn driven by healthy volume growth, price hikes and premiumisation.
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Operating margins for the quarter expanded sharply by 300bps to 8.3% aided by sharp 440bps and 200bps drop in raw material and overhead cost respectively. Higher outsourcing and advertising cost restricted further margin expansion. Gross margins expanded by 234bps aided by better product mix and improved realizations.
| As a % of net sales |
Q1 FY14 |
Q1 FY13 |
bps yoy |
Q4 FY13 |
bps qoq |
| Material costs |
47.9 |
52.3 |
(436) |
49.2 |
(122) |
| Purchase of goods |
11.7 |
9.7 |
202 |
13.9 |
(213) |
| Personnel costs |
3.5 |
3.1 |
38 |
1.9 |
155 |
| Advertising cost |
9.0 |
8.1 |
94 |
8.4 |
65 |
| Other overheads |
19.5 |
21.5 |
(198) |
18.9 |
64 |
| Total costs |
91.7 |
94.7 |
(300) |
92.2 |
(51) |
- Britannia is setting up plants in different geographic locations (two new units at Patna and Odisha, new bakery plant in Gujarat at a cost of Rs500mn) to reduce freight cost. This will help reduce lead distance by 100-150kms. The company has also implemented initiatives like alternative fuels to keep costs as low as possible.
- Net profit almost doubled to Rs863mn – above our expectations of Rs756mn led by healthy revenue growth, improved operating efficiency and higher other income. Effective tax rate for the quarter was higher at 33.2% against 28.1% in Q1 FY13.
- Britannia is the largest player in the fast growing biscuits category with a market share of over 30% with a strong portfolio of brands like – Tiger, 50:50, MarieGold, Good Day, Milk Bikis, Treat and NutriChoice. Britannia is focusing on premiumisation of its product portfolio. We believe it will help the company achieve better margins in the long term. We maintain Buy given healthy domestic volume growth, improved performance of subsidiaries and attractive valuations. Increase in competitive intensity, input cost inflation and slowdown in domestic volume growth are the key risks to our call. At the current market price of Rs748, the stock is trading at 22.9x FY15E EPS of Rs32.6. We maintain Buy with a revised 9-month price target of Rs831.
| (Rs m) |
Q1 FY14 |
Q1 FY13 |
% yoy |
Q4 FY13 |
% qoq |
| Net sales |
14,034 |
12,216 |
14.9 |
14,866 |
(5.6) |
| Material cost |
(6,729) |
(6,390) |
5.3 |
(7,309) |
(7.9) |
| Purchase of FG |
(1,645) |
(1,185) |
38.9 |
(2,060) |
(20.1) |
| Personnel cost |
(486) |
(377) |
29.0 |
(284) |
71.0 |
| Advertising cost |
(1,265) |
(987) |
28.2 |
(1,244) |
1.7 |
| Other overheads |
(2,741) |
(2,627) |
4.3 |
(2,808) |
(2.4) |
| Operating profit |
1,168 |
651 |
79.5 |
1,161 |
0.6 |
| OPM (%) |
8.3 |
5.3 |
300 bps ***Note: This is a
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