CMP 900.00

Target Price 970.00

ISIN: INE216A01022

FEBRUARY 17th

2014

BRITANNIA INDUSTRIES LTD

Result Update: Q3 FY14

BUYBUYBUYBUY

Index Details

Stock Data

Sector FMCG (Food)

BSE Code 500825

Face Value 2.00

52wk. High / Low (Rs.) 972.50/478.15

Volume (2wk. Avg.) 3733

Market Cap (Rs. in mn.) 107955.00

Annual Estimated Results (A*: Actual / E*: Estimated)

YEARS FY13A FY14E FY15E

Net Sales 56154.90 63312.11 69643.32

EBITDA 4270.00 6156.40 6740.73

Net Profit 2338.70 3771.59 4133.11

EPS 19.58 31.44 34.46

P/E 45.97 28.62 26.12

Shareholding Pattern (%)

1 Year Comparative Graph

BRITANNIA INDUSTRIES LTD BSE SENSEX

SYNOPSIS

Britannia Industries Limited engages in the

production and sale of bakery and dairy products

in India and internationally.

Consolidated revenue growth of 10.2% in Q3 and

12.3% for the nine months at Rs. 17719.4 mn &

Rs. 51002.7 mn respectively.

Net Profit for Q3 increased 62.1% and for the

nine months increased 71.8%, on a consolidated

basis, at Rs. 1005.6 mn & Rs. 2876.9 mn

respectively.

Standalone net profit jumps to Rs. 963.30 mn

against Rs. 569.60 mn in the corresponding

quarter ending of previous year, an increase of

69.12%.

Standalone revenue for the quarter rose 10.93%

to Rs. 16280.30 mn from Rs. 14675.80 mn, when

compared with the prior year period.

Standalone Profit before interest, depreciation

and tax is Rs. 1542.70 millions as against Rs.

1038.10 millions in the corresponding period of

the previous year.

Britannia has got 600,000 outlets across India

and is expanding its distribution network in rural

areas.

Net Sales and PAT of the company are expected to

grow at a CAGR of 12% and 30% over 2012 to

2015E respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Britannia Industries Ltd 900.00 107955.00 19.58 45.97 16.89 425.00

Nestle India Ltd 5075.40 489020.50 115.58 43.88 27.19 485.00

Jubilant Foodworks Ltd 1036.05 67785.50 20.41 50.76 15.54 0.00

GlaxoSmithKline Consumer Healthcare 4280.00 180287.90 119.62 35.84 9.67 450.00

Recommendation & Analysis - ‘BUY’

Britannia Industries Ltd. (BIL), India’s leading Food Company, reported consolidated revenue growth of

10.2% in Q3 and 12.3% for the nine months at Rs. 17719.4 mn & Rs. 51002.7 mn respectively. Standalone

revenue for Q3 at Rs. 16144.3 mn and for the nine months at Rs. 46123.2 mn increased 11.1% & 13.1%

respectively. Net Profit for Q3 increased 62.1% and for the nine months increased 71.8%, on a consolidated

basis, at Rs. 1005.6 mn & Rs. 2876.9 mn respectively. Standalone net profit for Q3 at Rs. 963.3 mn and for the

nine months at Rs. 2783.0 mn increased 69.1% and 90.6% respectively. In an intensely competitive market,

the Company’s strong brands and focused on fundamental levers of operation to deliver consolidated double

digit revenue growth with 250 bps increase in operating margin.

Britannia’s focus continues to be on profitable growth, driven through innovation and operational excellence

right through the value chain. Revenue and cost management form an intrinsic part of operational excellence

and will continue to be monitored closely for improvement. The role of innovation of the Company is about

creating new sources of value. These include completely new or renovated products and packs that create

greater consumer delight or the application of new technology that reduces cost and increases quality

delivery, or a process innovation that reduces time to completion and increases efficiency. This

comprehensive view of innovation enables company to experiment and pilot new initiatives and scales those

that are successful. Consequently, and in line with its strategy, the Company has invested in creating new

capacity, both through its own Greenfield units and through expansion with its existing partners.

Over FY2012-15E, we expect the company to post a CAGR of 12% and 30% in its top-line and bottom-line

respectively. Hence, we recommend ‘BUY’ for ‘BRITANNIA INDUSTRIES LTD’ with a target price of Rs.

970.00 on the stock.

QUARTERLY HIGHLIGHTS (STANDALONE)

Results updates- Q3 FY14,

Months Dec-13 Dec-12 % Change

Net Sales 16280.30 14675.80 10.93

PAT 963.30 569.60 69.12

EPS 8.03 4.76 68.55

EBITDA 1542.70 1038.10 48.61

The company’s net profit jumps to Rs. 963.30 million against Rs. 569.60 million in the corresponding quarter

ending of previous year, an increase of 69.12%. Revenue for the quarter rose 10.93% to Rs. 16280.30 million

from Rs. 14675.80 million, when compared with the prior year period. Reported earnings per share of the

company stood at Rs. 8.03 a share during the quarter, registering 68.55% increase over previous year period.

Profit before interest, depreciation and tax is Rs. 1542.70 millions as against Rs. 1038.10 millions in the

corresponding period of the previous year.

Break up of Expenditure

Break up of Expenditure

Rs. Million

Q3 FY14 Q3 FY13

Cost of Material Consumed 8484.80 8258.20

Purchase of Stock in Trade 1592.20 1673.80

Employee Benefit Expenses 427.60 401.60

Depreciation &

Amortization Expense 160.20 149.20

Conversion & Other related

Charges 1458.80 1320.40

Advertisement & Sales

Promotion 1320.70 1227.50

Other Expenditure 1701.60 1603.90

COMPANY PROFILE

Britannia Industries Ltd is Indian company based in Industries Limited is an Indian company based

in Kolkata that is famous for its Britannia and Tiger brands of biscuit, which are popular throughout the country.

Britannia has an estimated 38% market share. The Company's principal activity is the manufacture and sale of

biscuits, bread, rusk, cakes and dairy products.

In 1892, Britannia started in a nondescript house in Kolkata with an initial investment of Rs 295. By 1910, with

the advent of electricity, mechanized its operations, and in 1921, it became the first company east of the Suez

Canal to use imported gas ovens.

In 1992, it celebrated its Platinum Jubilee. In 1997, the company unveiled its new corporate identity - "Eat

Healthy, Think Better" - and made its first foray into the dairy products market. In 1999, the "Britannia Khao,

World Cup Jao" promotion further fortified the affinity consumers had with 'Brand Britannia'.

Britannia strode into the 21st Century as one of India's biggest brands and the pre-eminent food brand of the

country. In recognition of its vision and accelerating graph, Forbes Global rated Britannia 'One amongst the Top

200 Small Companies of the World', and The Economic Times pegged Britannia India's 2nd Most Trusted Brand.

The brand Britannia is the trust of almost one-third of India's one billion populations and a strong management

at the helm on its path of innovation and quality.

Britannia is the leading biscuit manufacturer in the Rs. 124 billion Indian bakery market. Its primary business is

bakery consisting of biscuits, bread and cakes. The company operates in the dairy segment through its subsidiary

Britannia Dairy. The dairy segment comprising of milk, butter, cheese, ghee and curds accounts for 4.7% of

Britannia's group turnover.

Products Overview

The company's offerings are spread across the spectrum with products ranging from the healthy and economical

Tiger biscuits to the more lifestyle-oriented Milkman Cheese.

• Britannia NutriChoice Oat Cookies

• Britannia NutriChoice Ragi Cookies

• Britannia Veg Cakes

• Nutrichoice Health Starter Kit

• Britannia NutriChoice 5 Grain

• Tiger Banana

• NutriChoice Sugar Out: Litetime, Chocolate

cream, and Orange cream

• NutriChoice Digestive Biscuit

• Treat Fruit Rollz: Juicy Apple, Strawberry

Surprise, Tangy Orange and Delicious Dates

• New Britannia Milk Bikis

Global Presence

In March 2007, Britannia Industries Limited formed a Joint Venture with the Khimji Ramdas Group, one of the

largest and the most respected business conglomerates in the Middle East. Britannia and its Associates have

acquired a significant stake in Dubai based Strategic Food International Co. LLC and Oman based Al Sallan Food

Industries Co SAOG. The two companies are key regional players in the biscuits, wafers and cookies segment in

the GCC markets and export their products across the world.

Strategic Food International Co. LLC (SFIC) is one of the largest biscuit and wafer manufacturing companies in

the Middle East. An ISO and HACCP certified company. SFIC is also a proud winner of the Dubai Quality

Appreciation Certificate. It offers a wide spectrum of products under the brand Nutro, which is a leading biscuit

brand in the Middle East.

Al Sallan Food Industries Co is one of the foremost companies for the production of cookies, rolls and chocolates.

The products are well known under the brand name of Baker's Pride.

Brands Category

• Dairy products

Britannia holds an equity stake in Dynamix Dairy and outsources the bulk of its dairy products from its

associate. The products in this segment include Butter, Milk, Dahi, Diary Whitener, Ghee, Actimind, Tigerzor

Choco Milk, Tigerzor Badam Milk, Cheese and Gourmet.

• Biscuits

The brand names of biscuits include Time pass, Bourbon, Cookies, VitaMarieGold, Tiger, Nutrichoice Junior,

Good day, 50-50, Treat, Pure Magic, Milk Bikis, Good Morning, Bourbon, Thin Arrowroot, Nice, Little

Hearts, Marie Gold and many more.

Subsidiary companies

• Al Sallan Food Industries Co. SAOC

• Boribunder Finance and Investments

Private Limited

• Britannia and Associates (Dubai)

Private Company Limited, Dubai

• Britannia and Associates (Mauritius)

Private Limited, Mauritius

• Britannia Dairy Holdings Private

Limited, Mauritius

• Britannia Dairy Private Limited

• Britannia Lanka Private Limited, Sri

Lanka [Refer note (iv) below]

• Daily Bread Gourmet Foods (India)

Private Limited

• Flora Investments Company Private

Limited

• Ganges Vally Foods Private Limited

• Gilt Edge Finance and Investments

Private Limited

• International Bakery Products

Limited

• J B Mangharam Foods Private

Limited

• Manna Foods Private Limited

• Strategic Brands Holding Company

Limited, Dubai

• Strategic Food International Co. LLC,

Dubai

• Sunrise Biscuit Company Private

Limited

FINANCIAL HIGHLIGHT (STANDALONE)

Balance sheet as at March31, 2012 to 2015E

(A*- Actual, E* -Estimations & Rs. In Millions)

NEULAND LABORATORIES LTD. FY12A FY13A FY14E FY15E

SOURCES OF FUNDS (Rs.in.mn)

Shareholder's Funds

Share Capital 238.90 239.10 239.90 239.90

Reserves and Surplus 4961.50 6125.00 8268.75 9922.50

1. Sub Total - Net worth 5200.40 6364.10 8508.65 10162.40

2. Share application money pending allotment 0.00 22.90 0.00 0.00

3. Capital subsidy 0.00 48.20 45.50 46.41

Non Current Liabilities

Long Term Borrowings 281.50 4.10 3.85 4.24

Deferred Tax Liabilities 81.60 136.20 159.35 135.45

Other Long term Liabilities 199.10 191.80 199.47 211.44

Long Term Provisions 1168.20 1385.60 1515.85 1606.80

4. Sub Total - Non Current Liabilities 1730.40 1717.70 1878.53 1957.93

Current Liabilities

Short Term Borrowings 0.00 1892.40 0.00 0.00

Trade Payables 3362.00 3336.10 4837.35 5224.33

Other Current Liabilities 5182.60 2104.90 1683.92 1431.33

Short Term Provisions 1248.00 1344.00 833.28 866.61

5. Sub Total - Current Liabilities 9792.60 8677.40 7354.55 7522.28

Total Liabilities (1+2+3+4+5) 16723.40 16830.30 17787.22 19689.01

APPLICATION OF FUNDS

Non-Current Assets

Fixed Assets

Tangible assets 3706.30 4377.60 4859.14 5277.02

Intangible assets 84.60 139.20 157.30 171.45

Capital Work in Progress 797.30 1284.40 1432.11 1553.84

a) Sub Total - Fixed Assets 4588.20 5801.20 6448.54 7002.31

b) Non-current investments 2184.00 2341.00 2542.33 2720.29

c) Long Term Loans and Advances 1250.20 1413.10 1492.23 1581.77

d) Other Non-current Assets 121.20 121.20 126.05 132.35

1. Sub Total – Non Current Assets 8143.60 9676.50 10609.15 11436.72

Current Assets

Current Investment 2105.40 455.00 65.00 71.50

Inventories 3822.8 3314.90 4077.33 4729.70

Trade receivables 521.40 771.20 832.90 891.20

Cash and Bank Balances 309.40 644.80 580.32 696.38

Short-terms loans & advances 1820.80 1967.90 1622.53 1863.52

2. Sub Total - Current Assets 8579.80 7153.80 7178.07 8252.30

Total Assets (1+2) 16723.40 16830.30 17787.22 19689.01

Annual Profit & Loss Statement for the period of 2012to 2015E

Value(Rs.in.mn) FY12A FY13A FY14E FY15E

Description 12m 12m 12m 12m

Net Sales 49741.90 56154.90 63312.11 69643.32

Other Income 585.30 554.70 308.84 333.54

Total Income 50327.20 56709.60 63620.95 69976.86

Expenditure -46949.60 -52439.60 -57464.55 -63236.13

Operating Profit 3377.60 4270.00 6156.40 6740.73

Interest -380.70 -377.40 -55.45 -58.77

Gross profit 2996.90 3892.60 6100.95 6681.96

Depreciation -473.20 -570.80 -634.81 -691.94

Profit Before Tax 2523.70 3321.80 5466.15 5990.02

Tax -656.30 -983.10 -1694.55 -1856.91

Net Profit 1867.40 2338.70 3771.59 4133.11

Equity capital 238.90 238.90 239.90 239.90

Reserves 4961.50 6125.00 8268.75 9922.50

Face value 2.00 2.00 2.00 2.00

EPS 15.63 19.58 31.44 34.46

Quarterly Profit & Loss Statement for the period of 30th June, 2013 to 31st March, 2014E

Value(Rs.in.mn) 30-Jun-13 30-Sep-13 31-Dec-13 31-Mar-14E

Description 3m 3m 3m 3m

Net sales 14163.10 16100.00 16280.30 16768.71

Other income 138.70 43.80 56.40 69.94

Total Income 14301.80 16143.80 16336.70 16838.65

Expenditure -12866.60 -14567.90 -14794.00 -15236.05

Operating profit 1435.20 1575.90 1542.70 1602.60

Interest -33.50 -11.40 -5.70 -4.85

Gross profit 1401.70 1564.50 1537.00 1597.75

Depreciation -153.00 -156.60 -160.20 -165.01

Profit Before Tax 1248.70 1407.90 1376.80 1432.75

Tax -385.80 -451.10 -413.50 -444.15

Net Profit 862.90 956.80 963.30 988.59

Equity capital 239.40 239.70 239.90 239.90

Face value 2.00 2.00 2.00 2.00

EPS 7.21 7.98 8.03 8.24

Ratio Analysis

Particulars FY12A FY13A FY14E FY15E

EPS (Rs.) 15.63 19.58 31.44 34.46

EBITDA Margin (%) 6.79% 7.60% 9.72% 9.68%

PBT Margin (%) 5.07% 5.92% 8.63% 8.60%

PAT Margin (%) 3.75% 4.16% 5.96% 5.93%

P/E Ratio (x) 57.57 45.97 28.62 26.12

ROE (%) 35.91% 36.75% 44.33% 40.67%

ROCE (%) 70.25% 58.60% 79.78% 73.11%

Debt Equity Ratio 0.05 0.30 0.00 0.00

EV/EBITDA (x) 31.82 25.47 17.44 15.91

Book Value (Rs.) 43.54 53.28 70.93 84.72

P/BV 20.67 16.89 12.69 10.62

Charts

OUTLOOK AND CONCLUSION

� At the current market price of Rs.900.00, the stock P/E ratio is at 28.62 x FY14E and 26.12 x FY15E

respectively.

� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.31.44 and

Rs.34.46 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 30% over 2012 to 2015E

respectively.

� On the basis of EV/EBITDA, the stock trades at 17.44 x for FY14E and 15.91 x for FY15E.

� Price to Book Value of the stock is expected to be at 12.69 x and 10.62 x respectively for FY14E and FY15E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs. 970.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

Bakery

The Company’s Bakery portfolio includes biscuit, bread, cake and rusk. Biscuit is the largest of these

categories, and has attracted a vast array of competitors ranging from multinationals, on the one hand, to

large national local companies and smaller regional players. Cake, rusk and bread on the other hand compete

mostly with regional brands with Britannia being the only national player. Overall Bakery, despite the general

economic sluggishness, is still growing at 12-14%, with specific segments within that, growing faster – at the

top end, driven by differentiation and new taste experiences, and at the bottom end, through availability and

affordability. Britannia, with about a third share of the biscuit market and a dominant share of other baked

categories is well poised to benefit from this growth, driven by the diversity of its product range and its

availability footprint.

The food market itself has seen some interesting structural changes in the past few years with the emergence

of a diversified palate of choices across functional and indulgent products. Additionally, with greater affluence

and exposure, consumers are increasingly migrating from unbranded commodities, sold loose, to branded and

packaged solutions that are hygienic and convenient. The Company, therefore expects the overall Bakery

market to grow 13-15% in the coming year.

Dairy

India continues to be world’s largest producer and consumer of dairy products. While liquid milk

consumption continues to drive the industry, the dairy market is also witnessing a significant shift in value

added milk products like branded and packaged dahi, yoghurt, cheese, UHT milk and other milk based

beverages. Milk prices remained stable during the year which gave a further boost to the industry.

As mentioned earlier, with higher disposable income, a greater array of choices and an increasing health and

nutrition consciousness, the dairy industry will continue to benefit from the migration to branded and value-

added milk and milk based products. This has also increased industry competitiveness with local and regional

players going national and international players extending their presence and business portfolio.

Accessibility, coupled with superior differentiation is creating new categories and usage occasions indairy.

Increasing competitive intensity also means increased investment in infrastructure creation, all of which will

ultimately benefit the Indian consumers, as more and better quality products are created and launched.

OUTLOOK

The domestic market for packaged, branded food is expected to grow 13-15% in the near term. The challenge

to profitable growth comes from the trend in commodity prices, the general economic sentiment and a macro

environment that contributes to operational stability in the manufacturing units and markets. Simultaneously,

the Indian market opportunity and food market growth will attract new local and international players with

deep pockets and a differentiated capability in their domains of operation to enter and expand operations in

India. Creating a leadership position in this environment will demand that Britannia’s brands and their

propositions are relevant and exciting for consumers and differentiated enough to create a higher preference

and purchase. Britannia’s focus is on differentiating its products and continually renovating and innovating

them to create unique and superior experiences for its consumers and customers. This, combined with

effective cost management will generate profitable growth.

International markets present an opportunity to segment and channel resources to generate profitable

growth which is accretive to the domestic business and which the Company has demonstrated. Based on the

opportunities in international markets which the Company has isolated, the strategy focuses on key brands in

key markets to commercialise those opportunities by sourcing from its factories in India, Dubai and Sohar.

Britannia brands are now available in over 30 Countries.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of

any financial instrument or as an official confirmation of any transaction. The information contained herein is from

publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall not be in any way

responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained

in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

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