BUY

Results Update Britannia Industries Ltd. Target Price

07th May 2024 FMCG 5800

Strong Operating Performance Continues; Maintain BUY

(CMP as of 6th May 2024)

Est. Vs. Actual for Q4FY24: Revenue – BEAT; EBITDA – Marginal MISS; PAT – CMP (Rs) 5061
Marginal MISS Upside /Downside (%) 15%
Changes in Estimates post Q4FY24 High/Low (Rs) 5386/4349
Market cap (Cr) 121917
FY25E/FY6E: Revenue: -1%/-1%; EBITDA: -1%/-1%; PAT: -3%/-3%
Avg. daily vol.(6m)Shrs ‘000. 341
Recommendation Rationale No. of shares (Cr) 24

 In Q4FY24, BRIT demonstrated robust operating performance, achieving a 3%

Shareholding (%)
YoY revenue growth. This growth was primarily driven by a volume increase of ~5%, Sep-23 Dec-23 Mar-24
supported by strategic price reductions aimed at mitigating competitive pressures Promoter 50.6 50.6 50.6
and securing market share gains. The management further highlighted that it’s FIIs 19.7 19.0 18.2
MFs / UTI 5.7 5.4 6.5
aiming towards double-digit volume growth in H2FY25 (post-monsoon). EBITDA
FIs/ Banks 0.2 0.1 0.1
margins were at 19.4%, in line with expectations, down by 56bps YoY due to higher
Others 23.9 24.9 24.7
advertising spends.
Financial & Valuations
 The company continued to gain market share led by distribution expansion,
Y/E Mar (Rs Cr) FY24A FY25E FY26E
strategic price actions in key SKUs, and consistent investments behind brands and
Net Sales 16,546 18,444 20,654
innovations. EBITDA 3,170 3,535 3,980
Net Profit 2,143 2,435 2,789
 New Projects: Route-To-Market 2.0 project is underway to multiply adjacent
EPS (Rs.) 89.2 101.3 116.0
business revenue while further strengthening its core business. PER (x) 56.8 50.0 43.6
 We expect BRIT’s long-term prospects to remain strong as the management has EV/EBITDA (x) 38.6 34.4 30.2
P/BV (x) 30.9 25.3 20.1
a proven execution track record, robust portfolio planning through NPD in core and
ROE (%) 54.4 50.6 46.2
adjacencies, and a focus on continued distribution expansion, especially in rural
Change in Estimates (%)
areas.
Y/E Mar FY25E FY26E
Sector Outlook: Positive Sales (1) (1)
EBITDA (1) (1)
Company Outlook & Guidance: We maintain our BUY rating on the stock as the
PAT (3) (3)
company’s long-term story remains intact.
ESG disclosure Score**
Current Valuation: 50x Mar-26 EPS (Earlier Valuation: 50x Dec-25 EPS).
Environmental Disclosure 41.68

Current TP: Rs 5,800/share (Earlier TP: No change). Social Disclosure Score 26.81

Governance Disclosure Score 81.09

Recommendation: With an upside potential of 15% from the CMP, we maintain our
Total ESG Disclosure Score 49.90
BUY rating on the stock.
Sector Average 44.87

Valuation & Recommendation: Based on the above thesis, we estimate Source: Bloomberg, Scale: 0.1-100
**Note: This score measures the amount of ESG data a company reports
publicly and does not measure the company's performance on any data
Revenue/EBITDA/PAT CAGR of 9%/12%/13% over FY23-26E and maintain our BUY point. All scores are based on 2022 disclosures

rating on the stock with an unchanged TP to Rs 5,800/share, which implies an upside of Relative performance
15% from the CMP.

Key Financials (Consolidated)

(Rs Cr) Q4FY24 QoQ (%) YoY (%) Axis Est. Variance (%)
Net Sales 4,014 (4.2) 3.1 3,964 1.3
EBITDA 787 (4.1) (1.7) 793 (0.6) Source: Ace Equity, Axis Securities
EBITDA Margin (%) 19.4 6 bps -56 bps 19.4 -2 bps
PreeyamTolia
Net Profit 538 (3.3) (3.6) 544 (1.1) Research Analyst
email: [email protected]
EPS (Rs) 22.3 (3.3) (3.6) 22.7 (1.5)
SuhaneeShome
Source: Company, Axis Research
Research Associate
email: [email protected]

1
Financial Performance

 The company’s revenue grew by 3% YoY in Q4FY24, largely aided by volume growth as it undertook
price cuts to mitigate competition. Its gross margins increased by 107bps YoY to 44.1%, owing to
softer raw material prices (palm, laminates, and corrugated boxes), while prices of sugar and flour
remained firm. EBITDA margins stood at 19.4%, down by 56bps YoY on account of higher ad-spends.
The company’s Adj. PAT stood at Rs 538 Cr, down by 3.6% YoY.

 Outlook: We expect Britannia to deliver market-leading growth from here on for several reasons: 1)
Rural recovery continues to remain a focus area for Britannia, leveraging which it is building strong
rural distribution and gaining market share in focused states. Moreover, rural revival is anticipated in
the coming quarters, supported by better monsoons and higher government spending, 2) Britannia's
own initiatives such as robust portfolio planning through NPD in core and adjacencies along with its
continued focus on increasing direct reach, rural penetration, RTM 2.0 and a higher share of in-house
manufacturing would enhance its overall efficiency moving ahead, and 3) The management
expectations that raw material prices, though currently firm (wheat and sugar), will see ~3% inflation
which is manageable. We believe that these factors will strengthen Britannia in the mid/long run.
Other key takeaways

 NPD – Recently launched products like Jim Jam Pops and Gol Maal are experiencing strong traction
in the market. Additionally, Britannia introduced Good Day-Fruit & Nut cookies, Cake Rusk, and
Bourbon-Milk Shake during Q4FY24. Collectively, these products are contributing Rs 275 Cr
(annualized) to the company's topline.

 Adjacent Business remains on strong footing – Britannia's Bakery Adjacency, Dairy, and
international segments continue to demonstrate robust growth. Within the Dairy segment, the
company experienced strong traction in its cheese portfolio, while achieving double-digit growth in its
India business. Management has expressed high expectations for the dairy business in the upcoming
quarters. In the Bakery Adjacency segment, all product categories including Cake, Rusk, and Bread
delivered strong volume growths. The international business also remained resilient in Q4, driven by
strong performance in the GCC and American regions. Nepal also showed strong growth in both
revenues and profitability, maintaining its growth trajectory.

 Raw material – Palm oil, laminates, and corrugated boxes experienced a downward trend, while
prices for flour and sugar have increased. The management also indicated that the outlook for wheat
and sugar remains slightly inflationary in the coming quarters. It expects a 3% raw material inflation in
FY25, which it considers manageable.

 Distribution reach – The company’s direct distribution reach increased to 2.79 Mn outlets vs. 2.68
Mn outlets in Q4FY23. Rural Distribution reach stood at 30,000 distributors vs. 28,000 distributors in
Q4FY23.

 Regions – Focus states (Hindi Belt) continue to grow faster at 2.4x than the rest of India, led by
increased distribution reach and rural expansion.

Key Risks to our Estimates and TP

 Increase in competitive intensity; Prolonged demand recovery; RM inflation

Change in Estimates

Old Revised Change (%)

FY25 FY26 FY25 FY26 FY25 FY26
Revenue 18,647 20,882 18,444 20,654 (1) (1)
EBITDA 3,571 4,020 3,535 3,980 (1) (1)
PAT 2,500 2,863 2,435 2,789 (3) (3)
EPS 104 119.2 101 116 (3) (3)
Source: Company, Axis Securities

2
Results Review

Axis Sec YoY QoQ Axis Sec

(Rs Cr) Q4FY23 Q3FY24 Q4FY24
Est. growth % growth (%) Var (%)

Volume growth (% yoy) 2.0 5.5 5.0 5.0

Price growth (%yoy) 8.9 (3.3) (3.0) (1.9)
Net Sales 3,892 4,192 3,964 4,014 3.1 (4.2) 1.3
Other operating income 131 65 127 55 (57.8) (14.3) (56.5)
Gross Profits 1,676 1,803 1,697 1,772 5.7 (1.7) 4.4
Gross Margin (%) 43.1 43.0 42.8 44.1 107 bps 113 bps 132 bps
Staff costs 171 198 188 162 (5.0) (18.4) (13.6)
Other operating expenses 836 848 844 877 5.0 3.5 3.9
EBITDA 801 821 793 787 (1.7) (4.1) (0.6)
EBITDA margin (%) 19.9 19.3 19.4 19.4 -56 bps 6 bps -2 bps
Depreciation -65 -78 -82 -80 22.3 2.4 (2.5)
EBIT 736 743 711 708 (3.8) (4.8) (0.4)
Interest -35 -31 -34 -26 (24.2) (15.0) (22.7)
Other Income 56 51 59 57 1.7 13.4 (3.1)
PBT 757 762 736 738 (2.5) (3.2) 0.4
Tax rate (%) 26.9 26.6 26.0 26.8 -6 bps 25 bps 82 bps
Rep PAT 559 556 544 538 (3.6) (3.3) (1.1)
EPS 23.2 23.1 22.7 22.3 (3.6) (3.3) (1.5)
Source: Company, Axis Securities

3
Financials (Consolidated)
Profit & Loss (Rs Cr)
Y/E Mar, Rs Cr FY23 FY24A FY25E FY26E
Net sales 15,985 16,546 18,444 20,654
Growth, % 15 4 11 12
Other operating income 316 223 241 260
Total income 16,301 16,769 18,685 20,914
Raw material expenses (9,591) (9,492) (10,584) (11,854)
Employee expenses (658) (709) (794) (873)
Other Operating expenses (3,220) (3,399) (3,773) (4,208)
EBITDA (Core) 2,831 3,170 3,535 3,980
Growth, % 29 12 12 13
Margin, % 18 19 19 19
Depreciation (226) (300) (331) (359)
EBIT 2,605 2,869 3,204 3,621
Growth, % 30 10 12 13
Margin, % 16 17 17 18
Interest paid (169) (164) (131) (105)
Other Income 216 214 248 288
Pre-tax profit 3,033 2,913 3,321 3,804
Tax provided (716) (779) (886) (1,015)
Profit after tax 2,316 2,134 2,435 2,789
Others (Minorities, Associates) 5 6 - -
Net Profit 2,322 2,140 2,435 2,789
Growth, % 28 10 14 15
Net Profit (adjusted) 1,946 2,143 2,435 2,789
Unadj. shares (Cr) 24 24 24 24
Wtdavg shares (Cr) 24 24 24 24
Source: Company, Axis Securities

Balance Sheet (Rs Cr)

Mar, Rs Cr FY23 FY24E FY25E FY26E
Cash & bank 198 454 1,249 2,424
Marketable securities at cost 1,801 1,801 1,801 1,801
Debtors 329 340 380 425
Inventory 1,193 1,235 1,377 1,542
Loans & advances 560 560 560 560
Other current assets 665 665 665 665
Total current assets 4,746 5,055 6,031 7,417
Investments 1,523 1,523 1,523 1,523
Gross fixed assets 4,148 4,598 4,998 5,398
Less: Depreciation (1,492) (1,793) (2,124) (2,483)
Add: Capital WIP 105 105 105 105
Net fixed assets 2,760 2,910 2,979 3,019
Non-current assets 266 266 266 266
Total assets 9,353 9,811 10,856 12,283

Current liabilities 4,134 4,185 4,357 4,558

Provisions 26 26 26 26
Total current liabilities 4,160 4,211 4,383 4,583
Non-current liabilities 1,628 1,628 1,628 1,628
Total liabilities 5,788 5,839 6,011 6,211
Paid-up capital 24 24 24 24
Reserves & surplus 3,510 3,918 4,790 6,017
Shareholders’ equity 3,565 3,972 4,845 6,071
Total equity & liabilities 9,353 9,811 10,856 12,283
Source: Company, Axis Securities

4
Cash Flow (Rs Cr)
Y/E Mar, Rs Cr FY23 FY24E FY25E FY26E
Pre-tax profit 3,033 2,913 3,321 3,804
Depreciation 226 300 331 359
Chg in working capital 228 (3) (9) (10)
Total tax paid (722) (779) (886) (1,015)
Other operating activities - - - -
Cash flow from operating activities 2,765 2,432 2,757 3,138
Capital expenditure (697) (450) (400) (400)
Chg in investments (595) - - -
Chg in marketable securities (967) - - -
Other investing activities - - - -
Cash flow from investing activities (2,254) (453) (400) (400)
Free cash flow 511 1,979 2,357 2,738
Equity raised/(repaid) (158) - - -
Debt raised/(repaid) 845 - - -
Dividend (incl. tax) (1,361) (1,732) (1,562) (1,562)
Other financing activities - - - -
Cash flow from financing activities (666) (1,727) (1,562) (1,562)
Net chg in cash (155) 252 795 1,176
Opening cash balance 185 198 454 1,249
Closing cash balance 198 454 1,249 2,424
Source: Company, Axis Securities
Ratio Analysis (%)
Y/E March FY23 FY24E FY25E FY26E
Per Share data
EPS (INR) 81.0 89.2 101.3 116.0
Growth, % 27.5 10.1 13.6 14.5
Book NAV/share (INR) 147.1 164.0 200.3 251.4
FDEPS (INR) 81.0 89.2 101.3 116.0
CEPS (INR) 74.8 101.8 115.1 131.0
CFPS (INR) 119.1 92.4 104.4 118.6
DPS (INR) 56.6 72.1 65.0 65.0
Return ratios
Return on assets (%) 29.5 24.0 24.8 25.0
Return on equity (%) 55.1 54.4 50.6 46.2
Return on capital employed (%) 57.9 42.4 42.3 40.7
Turnover ratios
Asset turnover (x) 5.8 5.9 6.3 6.9
Sales/Total assets (x) 1.9 1.7 1.8 1.8
Sales/Net FA (x) 6.3 5.8 6.3 6.9
Receivable days 7.5 7.5 7.5 7.5
Inventory days 27.2 27.2 27.2 27.2
Payable days 39.3 40.3 40.3 40.3
Working capital days (31.7) (30.5) (27.2) (24.1)
Liquidity ratios
Current ratio (x) 1.1 1.2 1.4 1.6
Quick ratio (x) 0.9 0.9 1.1 1.3
Interest cover (x) 15.4 17.5 24.4 34.5
Total debt/Equity (%) 0.8 0.8 0.6 0.5
Net debt/Equity (%) (0.0) (0.1) (0.2) (0.4)
Valuation
PER (x) 62.5 56.8 50.0 43.6
PEG (x) - y-o-y growth 2.3 5.6 3.7 3.0
Price/Book (x) 34.4 30.9 25.3 20.1
EV/Net sales (x) 7.7 7.4 6.6 5.8
EV/EBITDA (x) 43.3 38.6 34.4 30.2
EV/EBIT (x) 47.1 42.6 37.9 33.2
Source: Company, Axis Securities

5
 Britannia Industries PriceChart and Recommendation History

(Rs)

Date Reco TP Research

31-Jan-22 HOLD 3,700 Result Update
04-Aug-22 HOLD 4,000 Result Update
07-Nov-22 BUY 4,550 Result Update
02-Feb-23 BUY 5,100 Result Update
05-May-23 BUY 5,300 Result Update
07-Aug-23 BUY 5,110 Result Update
02-Nov-23 BUY 5,150 Result Update
08-Feb-24 BUY 5,800 Result Update
07-May-24 BUY 5,800 Result Update

Source: Axis Securities

6
About the analyst

Analyst: Preeyam Tolia

Contact Details: [email protected]

Sector: FMCG& Retail

Analyst Bio: Preeyam Tolia is B.com and CFA Level 1 and part of the Axis Securities Research Team.

About the analyst

Analyst: Suhanee Shome

Contact Details: [email protected]

Sector: FMCG& Retail

Analyst Bio: Suhanee Shome is MBA and part of the Axis Securities Research Team

Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
1. Axis Securities Ltd. (ASL) is a SEBI Registered Research Analyst having registration no. INH000000297. ASL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Depository participant services & distribution of various financial products. ASL
is a subsidiary company of Axis Bank Ltd. Axis Bank Ltd. is a listed public company and one of India’s largest private sector bank and has its various
subsidiaries engaged in businesses of Asset management, NBFC, Merchant Banking, Trusteeship, Venture Capital, Stock Broking, the details in respect of
which are available on www.axisbank.com.
2. ASL is registered with the Securities & Exchange Board of India (SEBI) for its stock broking & Depository participant business activities and with the
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activity.
3. ASL has no material adverse disciplinary history as on the date of publication of this report.
4. I/We, Preeyam Tolia (MBA & CFA L1) and Suhanee Shome (MBA) hereby certify that all of the views expressed in this research report accurately reflect
my/our views about the subject issuer(s) or securities. I/We (Research Analyst) also certify that no part of my/our compensation was, is, or will be directly or
indirectly related to the specific recommendation(s) or view(s) in this report. I/we or my/our relative or ASL does not have any financial interest in the subject
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7
 DEFINITION OF RATINGS

Ratings Expected absolute returns over 12-18 months

BUY More than 10%

HOLD Between 10% and -10%

SELL Less than -10%

NOT RATED We have forward looking estimates for the stock but we refrain from assigning valuation and recommendation

UNDER REVIEW We will revisit our recommendation, valuation and estimates on the stock following recent events

NO STANCE We do not have any forwardlooking estimates, valuation or recommendation for the stock

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CHADAWAR
CHADAWAR Date: 2024.05.07 08:54:16 +05'30'