3 June 2020
4QFY20 Results Update | Sector: Consumer
Britannia Industries
Estimate change
TP change
Rating change
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CMP: INR3,510
TP: INR3,470 (-1% )
Neutral
Earnings outlook seems promising, but valuations
fully capture upside
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
BRIT IN
240
844.1 / 11
3705 / 2101
10/31/33
1724
Financials & Valuations (INR b)
Y/E March
2020 2021E 2022E
Sales
116.0 132.3 147.0
Sales Gr. (%)
4.9 14.0 11.1
EBITDA
18.4 22.6 25.2
Margins (%)
15.9 17.1 17.1
Adj. PAT
14.1 16.7 18.6
Adj. EPS (INR)
58.6 69.5 77.1
EPS Gr. (%)
21.8 18.5 11.0
BV/Sh.(INR)
183.1 188.0 193.4
Ratios
RoE (%)
32.6 37.5 40.5
RoCE (%)
24.2 25.5 28.3
Payout (%)
60.9 80.0 80.0
Valuations
P/E (x)
59.9 50.5 45.5
P/BV (x)
19.2 18.7 18.2
EV/EBITDA (x)
45.0 36.5 32.7
Div. Yield (%)
1.0
1.6
1.8
Shareholding pattern (%)
As On
Mar-20 Dec-19
Promoter
50.6
50.6
DII
13.4
13.6
FII
14.7
15.8
Others
21.3
20.0
FII Includes depository receipts
BRIT declared an in-line set of results, but we are pleasantly surprised with
the commentary on ~24% avg. sales growth in Apr–May’20. The
management attributed this growth to high in-home consumption in the
lockdown period and BRIT being quicker off the block than peers after the
initial COVID-19-led disruption.
Two factors highlighted in the post-results call could keep multiple re-rating
in check. (a) The management going back on its stated commitment of Inter
Corporate Deposits (ICDs) not exceeding INR5b. (b) The company following
the policy of not repaying debt while letting the investment book to build
up despite a sharp inventory reduction in the past six months. This would
lead to consequent concerns over ROCE.
While we have revised our FY21 and FY22 EPS by 19.8% and 15.4%,
respectively, but valuations fully capture upside at 45.5x FY22 EPS.
Maintain
Neutral.
BRIT’s consol. sales increased 2.5% YoY to INR28.7b
(in-line) in 4QFY20.
Standalone sales were flat YoY at INR26.9b. We believe base business
volume growth would be flat YoY (in line with our estimate). Consol.
EBITDA grew 4.1% YoY to INR4.5b (in-line), consol. PBT 1.6% YoY to INR4.6b
(est.: INR4.4b), and consol. adj. PAT 26.5% YoY to INR3.7b (est.: INR3.4b).
Consol. gross margin contracted by 150bp YoY to 39.7%
due to moderate
inflation in the price of key raw materials for the bakery business. As a
percentage of sales, higher staff cost (40bp YoY) and lower other expenses
(-210bp YoY) implied the EBITDA margin expanded 20bp YoY to 15.8% (in-
line).
FY20 consol.
sales / EBITDA / adj. PAT grew 4.9%/6.3%/21.9% YoY.
BRIT witnessed a segmental uptick over Jan–Feb’20 (unlike FMCG peers)
and its rural initiatives have also enabled growth.
BRIT reported an average 24% increase in the first two months of 1QFY21
owing to: (a) high in home consumption and (b) the company’s nimbleness
in ensuring faster availability of products compared to peers. The
management believes the trust in brands also plays a big role in times when
safety is a concern.
In 1QFY21, the outlook on all commodities is weak, including palm oil and
milk, which were up 18% YoY and 50% YoY, respectively, in 4QFY20.
ICD is at the same level as a year ago, i.e., at around INR6b, but higher than
the earlier commitment of not exceeding INR5b levels.
Sales/EBITDA in-line; PAT beat on lower taxes and higher other income
Highlights from management commentary
Mar-19
50.7
12.4
15.8
21.2
Krishnan Sambamoorthy – Research analyst
(Krishnan.Sambamoorthy@MotilalOswal.com); +91 22 6129 1545
Research analyst: Pooja Doshi
(Pooja.Doshi@MotilalOswal.com); +91 22 6129 1573 |
Dhairya Dhruv
(Dhairya.Dhruv@motilaloswal.com); +91 22 6129 1547
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.