Reduce Britannia Industries, target price Rs 3800: HDFC Securities

HDFC Securities has reduce call on Britannia Industries with a target price of Rs 3800. The current market price of Britannia Industries Ltd. is Rs 4626.25.

Britannia Industries, incorporated in the year 1918, is a Large Cap company (having a market cap of Rs 111483.48 Crore) operating in FMCG sector.

Britannia Industries key Products/Revenue Segments include Food Products, Other Operating Revenue, Scrap, Royalty Income for the year ending 31-Mar-2022.

Financials
For the quarter ended 31-12-2022, the company has reported a Consolidated Total Income of Rs 4247.55 Crore, down -4.18 % from last quarter Total Income of Rs 4432.85 Crore and up 17.01 % from last year same quarter Total Income of Rs 3630.11 Crore. Company has reported net profit after tax of Rs 930.93 Crore in latest quarter.

The company’s top management includes Mr.Nusli N Wadia, Mrs.Tanya Dubash, Mr.Keki Elavia, Dr.Y S P Thorat, Dr.Ajay Shah, Mr.Ness N Wadia, Dr.Ajai Puri, Mr.Keki Dadiseth, Mr.N Venkataraman, Mr.Avijit Deb, Mr.Varun Berry, Mr.Rajneet Singh Kohli. Company has Walker Chandiok & Co. LLP as its auditors. As on 31-12-2022, the company has a total of 24 Crore shares outstanding.

Investment Rationale
The brokerage believes the GM will normalise after Q4 (once price hike anniversaries) and model 41% GM forFY24. EBITDA margin expanded by 438/323bps YoY/QoQ to 19.5% (HSIE16.3%)—the highest of the last nine quarters. EBITDA was up by a massive>50% YoY (HSIE 27%) to INR 8.2bn, clocking a three-year CAGR of 18%. The core metric of consistent product launches, distribution expansion and marketing campaigns remained the key focus areas.

The brokerage increases its EPS by11/3/3% for FY23/24/25. Further, it values Britannia at 37x P/E on Dec-24 EPS to derive a target price of Rs 3,800, maintaining a REDUCE call on the counter.

Promoter/FII Holdings
Promoters held 50.55 per cent stake in the company as of 31-Dec-2022, while FIIs owned 18.46 per cent, DIIs 8.02 per cent.