Prabhudas Lilladher has given Buy recommendation for Britannia Industries with a target price of Rs. 4280 in its research report issued on Feb 08, 2021

Prabhudas Lilladher’s research report on Britannia Industries

We are increasing FY21/22/23 EPS estimates by 5.3/0.1/-0.9% on better than expected margin delivery due to benign inputs despite slow recovery in MT, Insti, OOH channels. 3Q revenues grew by 5.7% (4% volume growth) as pantry stoking normalized and transit cluster underperformed. BRIT continues to build on its strategic pillars of 1) innovations 2) affordable packs/pricing (biscuits–Rs5/10 in premium brands) 3) direct distribution (up 16% since March 20) 4) Adjacent product segments (Cake, Cream wafers, salted snacks, milkshakes) 5) cost efficiency programs (Rs2.5bn/1.5-2% of sales) and 6) high growth in Hindi heartland (1.3-1.6x). We expect BRIT to sustain efficiency gains given improvement of 1) 7% in factory productivity 2) 30% in wastage 3) 10% in depot space and 4) increase in direct dispatch from 8% to 22%. We believe launch of family packs in MT and Online and increased growth in segments like Rusk, Cake, Wafers, Croissants and Dairy based drinks will propel growth in coming quarters.

Outlook

We estimate 24.6% PAT growth in FY21E and 13.9% CAGR over FY20-23. We value the stock at 46xFY23 EPS and arrive at SOTP based target price of Rs4280 (Rs4301 earlier). Retain Buy.

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