1

SYNOPSIS

Britannia Industries Limited engages

in the production and sale of bakery

and dairy products in India and

internationally.

During the quarter ended, the

robust growth of revenue is

increased by 18.05% Rs.12956.80

million.

Net Sales and PAT of the company

are expected to grow at a CAGR of

20% and 19% over 2010 to 2013E

respectively.

CRISIL has assigned credit rating to

Britannia Industries’ as AAA rating.

Britannia holds an equity stake

in Dynamix Dairy and outsources

the bulk of its dairy products from

its associate.

Years Net sales EBITDA Net Profit EPS P/E

FY 11 42199.70 2804.70 1452.90 12.16 36.69

FY 12E 50217.64 3189.48 1698.91 14.22 31.38

FY 13E 59256.82 35980.82 1952.74 16.35 27.30

Stock Data:

Sector: Food Processing

Face Value Rs. 2.00

52 wk. High/Low (Rs.) 498.00/324.00

Volume (2 wk. Avg.) 4292

BSE Code 500825

Market Cap (Rs.In mn) 53304.56

Share Holding Pattern

1 Year Comparative Graph

Britannia Indus BSE SENSEX

C.M.P: Rs. 446.25 Target Price: Rs. 504.00 Date: Jan 5th, 2012 BUY

Britannia Industries Ltd Result Update: Q2 FY 12

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Peer Group Comparison

Name of the company CMP(Rs.) Market

Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Britannia Industries 446.25 53304.56 13.41 33.28 11.81 325.00

Nestle India 4055.50 391351.40 96.88 41.86 45.71 485.00

Kwality Dairy 37.95 7710.90 3.19 11.90 8.47 10.00

GSK Consumer 2450.00 103036.10 83.10 29.48 10.73 500.00

Investment Highlights

Q2 FY12 Results Update

Britannia Industries has posted net profit of Rs 378.50 million for the quarter

ended Sept 30, 2011 as compared to Rs 318.30 million for the quarter ended Sept

30, 2010, representing rise of 18.76%. Net sales surged by 18.05% to Rs.12956.80

million from Rs.10975.30 million as compared to same quarter last year. Total

income has increased from Rs 13051.80 million for the quarter ended Sept 30,

2010 to Rs 11072.40 million for the quarter ended Sept 30, 2011, representing

increase of 17.88%. The EPS of the company is stood at Rs.15.84 for each share for

the quarter ended Sept 2011.

Quarterly Results - Standalone (Rs in mn)

As At Sep-11 Sep -10 %change

Net sales 12956.80 10975.30 18.05

PAT 378.50 318.30 18.76

Basic EPS 15.84 13.34 18.76

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� Break up of expenditure

Company Profile

Britannia 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 1975, the Britannia Biscuit Company took over the distribution of biscuits from

Parry's who till now distributed Britannia biscuits in India. In the subsequent public

issue of 1978, Indian shareholding crossed 60%, firmly establishing the Indian’s of the

firm. The following year, Britannia Biscuit Company was re-christened Britannia

Industries Limited (BIL). Four years later in 1983, it crossed the Rs. 100 crores

revenue mark.

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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.

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 SugarOut: 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

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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 Timepass, 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.

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Financial Results

12 Months Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) FY10 FY11 FY12E FY13E

Description 12m 12m 12m 12m

Net Sales 34166.00 42199.70 50217.64 59256.82

Other Income 401.00 525.60 578.16 635.98

Total Income 34567.00 42725.30 50795.80 59892.79

Expenditure -32941.60 -39920.60 -47606.33 -56293.98

Operating Profit 1625.40 2804.70 3189.48 3598.82

Interest -42.30 -377.40 -388.72 -404.27

Gross profit 1583.10 2427.30 2800.76 3194.55

Depreciation -375.50 -445.90 -476.67 -519.57

Profit Before Tax 1207.60 1981.40 2324.09 2674.98

Tax -42.70 -528.50 -625.18 -722.24

Profit After Tax 1164.90 1452.90 1698.91 1952.73

Equity capital 238.90 238.90 238.90 238.90

Reserves 3723.60 4274.10 5973.01 7925.74

Face value 10.00 2.00 2.00 2.00

EPS 48.76 12.16 14.22 16.35

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Quarterly Ended Profit & Loss Account (Standalone)

Value(Rs.in.mn) 31-Mar-11 30-Jun-11 30-Sep-11 31-Dec-11E

Description 3m 3m 3m 3m

Net sales 11237.80 11075.50 12956.80 12827.23

Other income 100.90 258.20 95.00 108.30

Total Income 11338.70 11333.70 13051.80 12935.53

Expenditure -10519.80 -10556.90 -12320.00 -12140.98

Operating profit 818.90 776.80 731.80 794.56

Interest -90.70 -93.10 -96.80 -99.70

Gross profit 728.20 683.70 635.00 694.85

Depreciation -137.10 -110.90 -115.50 -118.97

Profit Before Tax 591.10 572.80 519.50 575.89

Tax -158.60 -154.80 -141.00 -155.49

Profit After Tax 432.50 418.00 378.50 420.40

Equity capital 238.90 238.90 238.90 238.90

Face value 2.00 2.00 2.00 2.00

EPS 3.62 3.50 3.17 3.52

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Key Ratios

Particulars FY10 FY11 FY12E FY13E

No. of Shares(In Million) 23.89 119.45 119.45 119.45

EBITDA Margin (%) 4.76% 6.65% 6.35% 6.07%

PBT Margin (%) 3.53% 4.70% 4.63% 4.51%

PAT Margin (%) 3.41% 3.44% 3.38% 3.30%

P/E Ratio (x) 9.15 36.69 31.38 27.30

ROE (%) 29.40% 32.19% 27.35% 23.92%

ROCE (%) 24.23% 36.82% 34.13% 31.87%

Debt Equity Ratio 1.08 0.96 0.73 0.58

EV/EBITDA (x) 6.56 19.01 16.71 14.81

Book Value (Rs.) 165.86 37.78 52.00 68.35

P/BV 2.69 11.81 8.58 6.53

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Charts:

10

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Outlook and Conclusion

At the current market price of Rs.446.25, the stock is trading at 31.38 x FY12E

and 27.30 x FY13E respectively.

Earning per share (EPS) of the company for the earnings for FY12E and FY13E

is seen at Rs.14.22 and Rs.16.35 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 20% and

19% over 2010 to 2013E respectively.

On the basis of EV/EBITDA, the stock trades at 16.71 x for FY12E and 14.81 x

for FY13E.

Price to Book Value of the stock is expected to be at 8.58 x and 6.53 x

respectively for FY12E and FY13E.

We expect that the company will keep its growth story in the coming quarters

also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.504.00 for Medium term investment.

Industry Overview

India is set to witness the next revolution in the food processing industry, as per Mr

Subodh Kant Sahai, the Union Minister for Food Processing Industries. The Centre

has set an investment target of Rs 100, 000 crore (US$ 18.90 billion) by 2015 in the

sector. The sector is expected to grow by 20 per cent and value addition to increase by

35 per cent by 2015.

India is the second largest producer of food and holds the potential to be the biggest

on global food and agriculture canvas, according to a Corporate Catalyst India (CCI)

survey. The Indian food industry comprises of food production and the food processing

industry. The food processing industry is one of the largest in India – it is ranked fifth

in terms of production, consumption, export and expected growth.

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Market Size of Indian Food Industry

The Indian fast moving consumer goods (FMCG) market is estimated to grow to US$

100 billion by 2025 from US$ 12 billion in 2011, according to market research firm

Nielsen's report titled Consumer 360. The report has identified four key trends that

will drive consumption: premiumisation, consumers switching from commodity to

brands, from indulgence to regular consumption, and acceptability.

Food Processing Industry

The Union Ministry of Food Processing plans to give emphasis on improving supply

chain, by creating large primary collection and distribution centres throughout the

country involving private sector, in the 12th Five Year Plan (2012-17) period.

Food processing industry is of enormous significance for India's development because

it has linked up economy, industry and agriculture in India, efficiently and effectively.

The three pillars being together have synergised the development process and

promoted the growth of the nation to a great extent.

There are 25, 367 registered food processing units in the country whose total invested

capital is Rs 84,094 crore (US$ 15.90 billion), as per a competitiveness report of the

National Manufacturing Competitiveness Council. This information was provided in a

written reply to the Lok Sabha, by Dr Charan Das Mahant, the Minister of State for

Food Processing Industries.

Food processing industry is one of the largest industries operating in India and is

divided into several segments.

Segments

The Food Processing Industry operates across various segments that include:

• Fruits & vegetables

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• Meat & poultry

• Dairy

• Marine products, grains and consumer foods (that includes packaged food,

beverages and packaged drinking water)

Value addition of food products is expected to increase from 8 per cent to 35 per cent

by 2025. Fruit & vegetable processing is also expected to increase from the current

level of 2 per cent to 25 per cent of total production by 2025, as per the CCI report.

Dairy sector – that holds highest share in processed food market – holds large

potential to be exploited. The report reveals that 37 per cent of the total dairy produce

is processed, of which only 15 per cent is done by the organised sector. Hence, there

lies a plethora of opportunity for investment and development.

The Vision Document 2015 envisages increasing the value addition to 35 per cent by

2015. The food processing sector is presently growing at an average rate of 13.5 per

cent per annum. Food processing industry is a potential source for driving the rural

economy and is of great importance to an agrarian economy like India.

Beverages

The Indian market for non-alcoholic drinks, is expected to grow at a compound

aggregate growth rate (CAGR) of around 15 per cent during 2009-2012, according to a

report published by market research firm RNCOS, titled "Indian Non-Alcoholic Drinks

Forecast to 2012".

Furthermore, the report forecasts the fruit/vegetable juice market to grow at a CAGR

of around 30 per cent in terms of value during 2009-2012, followed by the energy

drinks segment which is expected to grow at a CAGR of around 29 per cent during the

same period.

• Coca-Cola and its bottling partners will invest US$ 2 billion in India over five

years starting 2012, making it the single largest investment in one phase by the

company. The new investments will be infused across infrastructure

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development, brand building, sustainability programmes, innovation, marketing

and distribution expansion, according to Atul Singh, President and CEO, Coca-

Cola India and South West Asia

• Boost Juice is set to enter the Indian market and has also signed an agreement

with a local partner to this effect. "India is a high growth market and the

climate in many parts of India is similar to that in Australia," according to

Simon Feiglin of The Riverside Company, a US-based private equity investment

company

• Plastic packaging products maker, Manjushree Technopack plans to set up two

greenfield manufacturing facilities in Bengaluru at a cost of Rs 150 crore (US$

28.36 million) to manufacture polyethylene terephthalate (PET) bottles for the

food and beverages sectors by end of 2012

• The food and beverages sectors, including majors such as Pepsi, Coco Cola,

Cadbury and Bisleri, consume about 400,000 tonnes of PET bottles annually,

which is estimated to grow at 20 per cent in the next few years

Exports

The food processing industries in India has attracted foreign direct investment (FDI)

worth US$ 1,309.54 million from April 2000 to September 2011, according to the data

provided by Department of Industrial Policy and Promotion (DIPP).

Exports of organic food products are expected to grow five-fold by 2015, according to

the Agriculture and Processed Food Products Export Development Authority (APEDA).

The Government agency expects exports to touch US$ 1.43 billion by 2014-15 against

US$ 280 million in 2010-11.

"There are a total of 2,084 organic projects in India which have been certified by our

certification bodies. 191 out of these are exporters of organic produce," as per

Shailender Singh, Consultant, Organic Division, APEDA.

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Investment Trends

• Marquee investor Sequoia Capital will invest US$ 5 million for a minority stake

in Faaso's, a Pune-based vendor of Indian fast food. The chain will use this

funding to set up 300 to 400 outlets across India. According to some industry

estimates, the Indian "eating out" industry is itself worth Rs 100,000 crore (US$

18.90 billion) and growing at 15-20 per cent per annum, exciting investors such

as Sequoia

• Switzerland-based Franke Artemis Group is expanding its operations in India

and is set to launch a new vertical of food service systems in the country

involving a first phase investment of Rs 50 crore (US$ 9.45 million)

• CavinKare Group has entered the Indian confectionery segment with its liquid

candy, Funfills. The organised confectionery market in India is estimated at

approximately Rs 3,000 crore (US$ 567.11 million), as per Sanjay Sachdeva,

the firm's Business Head, Foods & Snacks

• With Indian coffee retailing set to grow 40 per cent per annum, Di Bella is set to

capitalise by expanding into other cities and if things go according to plan, then

opening 50 more outlets across India in the next three years

• Consumer goods makers such as L'Oreal, Ferrero, Kraft Cadbury, Del Monte

and Procter & Gamble are making more products in India to capitalise on the

growing consumer demand

• Italian chocolatier Ferrero, which saw sales of its chocolates such as Ferrero

Rocher and Kinder Joy grow by over 50 per cent this festive season, too, has set

up a plant in Maharashtra

• The world's largest consumer goods maker, Procter & Gamble, is investing Rs

700 crore (US$ 132.33 million) to expand its manufacturing capacity in India

These companies are increasing their manufacturing capacities in the country to take

advantage of lower production costs, save on import costs, and make their products

more competitive and widely available to the booming Indian consumer market.

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Players and Strategies

Major players in India's fast-moving consumer goods (FMCG) industry will continue to

pursue acquisitions over the medium term, given the scope for expansion in under-

penetrated product segments and geographies, and the intensifying competitive

pressures in the domestic market, as per a report by the credit rating agency, Crisil.

• Pizza chain major Domino's, which moved to the online platform in 2010,

expects India to be the biggest market for its online sales globally. "For us, e-

commerce in India is definitely going to grow huge," as per Patrick Doyle,

President and CEO, Domino's Pizza Inc

• Lavazza, the Italian coffee giant is getting its Indian game plan in place and as a

part of the consolidation process it has announced Law & Kenneth as its

communications partner that would assist the umbrella brand with strategic

and creative solutions to capture the Indian market

• "India is a top priority market and is in line with our emerging market growth

strategy. We foresee India to be a significant business in 10 years and are

committed to invest in this fast growing market," as per Alan Wilson, Chairman,

President and CEO, McCormick

• Australia's fastest-growing and most-awarded coffee company, Di Bella Coffee,

plans to enter the Indian market with at least six cafés in Mumbai in January

2012. "Our target is the youth. We would offer free internet usage per cup of

coffee," as per Sachin Sabharwal, Managing Director, Di Bella Coffee India Pvt

Ltd

• The branded frozen foods category is estimated at Rs 1,000 crore (US$ 189.04

million), and industry players say it is now growing at the rate of 20-25 per cent

per annum

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Government Initiatives

The Government of India has approved setting up of 15 mega food parks under

Infrastructure Development Scheme, with a total grant of Rs 787.50 crore (US$ 148.57

million), during the remaining period of 11th Five Year Plan (2007-12).

The Centre has also proposed to set up 30 food parks by the Ministry of Food

Processing Industries and this will help 20,000 small and medium industries engaged

in the manufacturing and processing of food products every year, as per N C Saha,

Director, IIP. The size of the food processing industry is likely to grow from US$ 200

billion at present to US$ 310 billion by 2015, added Saha.

The Ministry of Food Processing Industries has allocated Rs 595 crore (US$ 112.48

million) for different schemes to be implemented in the food processing sector during

2011-12.

Opening up the retail sector for FDI will give a tremendous boost to the economy of

fruit and vegetable growers in Himachal Pradesh, especially because its temperate

climate is ideal for off-season cultivation, says Prakash Thakur, Chairman, People for

Environment Horticulture and Livelihood, a non-governmental organisation (NGO)

involved in horticulture-related activities.

The Union Budget 2011-12 has also allocated US$ 135 million to the Food Processing

Ministry from the previous US$ 90 million. As a measure to boost investment in the

agriculture sector, the Minister extended the Viability Gap Funding Scheme (VGFS) for

public-private partnership (PPP) for setting up modern storage capacity besides giving

infrastructure status to cold chains.

Road Ahead

India's consumption growth story is expected to maintain its course of about 14 per

cent growth over the next three years driven by three factors-inclusiveness, mix

changes and specific consumption categories, as per senior analysts Vijay Chugh,

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Ashvin Shetty and Shariq Merchant in the report 'The Indian Consumer: a robust

operator in an uncertain world'.

The Government of India had also announced Vision 2015, which lays focus on

enhancing the competitiveness of food processing industry in both domestic as well as

international markets along with ensuring stable income levels to farmers. The Vision

2015 provides for enhancing the level of processing of perishable to 20 per cent,

enhancing value addition to 35 per cent and increasing the share in global food trade

from 1.5 per cent to 3 per cent, by 2015.

India remains an attractive market, with its growing economy, large population that

offers considerable scope for additional geographic penetration, particularly in the

rural areas, and low per-capita consumption.

The opportunities in the food processing industry are vast. As the economy grows, the

food processing industry will offer bigger opportunities to the new as well as the

existing players.

________________ ____ _________________________ 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.

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