Stock Market

This Tiger has a splendid run, fetches 10x returns in 5 years!

   Download Android App    Share in      FullScreen   CheckVideos

NEW DELHI: A consistent performer.

Check.

An industry beater.

Check.

A strong legacy.

Check. A large cap stock fetching 10 times returns in 5 years is a rarity.

But exceptions remain as this stock proves otherwise.

This has been an outlier, rewarding investors quite generously.

An established leader in packaged food space, Britannia Industries has come a long way.

It has proved to be a consistent money spinner for those who have stayed put.

On May 20, 2013, the stock had stood at Rs 568.3.

But that was then.

It has now zoomed to Rs 5,587.9, as of Friday's close (May 18) -- a jaw-dropping 883.26 per cent jump.

Other than Britannia, only two companies in the SP BSE 100 pack -- TVS Motor Company and Bajaj Finance -- have fetched over 10 times returns.

The benchmark index Sensex has risen only 73 per cent during this window. With a 100-year legacy, Britannia Industries enjoys annual revenues in excess of Rs 9,000 crore.

The company is the manufacturer of brands like Good Day, Tiger, NutriChoice, Milk Bikis and Marie Gold.

The product portfolio includes biscuits, bread, cakes, rusk, and other dairy products, including cheese, beverages, milk and yoghurt.

Its dairy business contributes close to 5 per cent of revenue with a reach of 1,00,000 outlets. The company has been consistent in its all round-growth.

Top line (sales) has clocked an 11 per cent CAGR (compounded annual growth rate) in five years.

During 2012-13, the figure stood at Rs 5,936 crore, which has gone up to Rs 9,829 crore in 2017-18.

Bottom line (net profit) saw a 31 per cent jump to Rs 1,004 crore, from Rs 260 crore during the same period.

The FMCG major has seen a 2.5 times jump in its direct reach.

Also, net sales value in rural areas has paced up consistently.

The company posted a healthy 25 per cent increase in its consolidated net profit at Rs 264 crore for the fourth quarter to March, riding on a double digit volume growth.

It had racked up net profit of Rs 211 crore a year ago. March quarter consolidated net sales, EBITDA and net profit grew 12.5 per cent, 28.9 per cent and 25 per cent to Rs 2,510 crore, Rs 400 crore and Rs 260 crore, respectively.

Brokerage JM Financial in its report said, "Revenue was on expected lines while profits were 6 per cent ahead of expectations on the back of significant savings in ‘Other Expenses’, which grew at one-third the rate of growth in volumes.

Part of the savings was offset by higher-than-expected rise in staff costs." The brokerage, however, finds the quality of growth a little disappointing because of two factors.

First, the pace of growth in domestic volumes fell a tad against third quarter (11 per cent against 13 per cent) on a broadly similar base.

Second, despite a deflationary trend in sugar and wheat prices, and higher contribution of pricing to growth this quarter, domestic GPM (gross profit margin) felt the squeeze, even though by just 38 bps. The management, however, cites marginal inflation in key raw material to be the key reason for the same. According to HDFC Securities, "the quarter marks the beginning of aggressive product launches (50 products in the next 4-6 quarters) with focus on innovation and premiumisation". New launches will lead to category extensions (biscuits, cake, rusk dairy) and entry into newer categories (croissant), the HDFC Securities report said.

Britannia is lining up a capex of nearly Rs 1,000 crore over the next 3 years at Ranjangaon plant to support these launches.

With this plant, the company is seen to be focusing on backward integration of dairy (earlier via contract packers) and flour (flour mill for scale).

The brokerage reels off reasons why it likes the stock. - Premiumisation (nearly 80 per cent mix of premium biscuits vs industry figure of 55 per cent) - Distribution expansion (rural and weak states) - Entry into new segments (croissants and other macro snacking products) - Cost optimisation (saving of Rs 2,400 crore in FY19 against Rs 2,250 crore in FY18) Even during tough days, leaders (HUL and Britannia) have stood tall and outperformed their peers in terms of volume and EBITDA growth.

The HDFC Securities model factors in 25 per cent EPS CAGR over FY18-20E.

It has maintained 'buy' rating on the stock with a target price of Rs 6,020. "Britannia is one of our favoured consumer themes, but valuations could now pose some near-term headwinds, especially post the recent run-up in the stock," said JM Financial.

The brokerage has maintained 'buy' on the stock with revised target price of Rs 5,530. Nirmal Bang Securities is equally positive on the stock.

"We expect the company to maintain healthy growth in FY19-FY20 supported by healthy innovation pipeline and expansion into new categories, continued expansion in Hindi heartland and finally commercialisation of its new greenfield facilities at Guwahati and Mundra SEZ," it stated. It has maintained 'buy' rating on the stock with a target price of Rs 6,350, based on FY20E EPS, implying an upside of 16 per cent. The company's international business grew in double digits despite a slowdown in many geographies like the Middle East and Africa.

Britannia has a presence in more than 60 countries across the globe.

Its international footprint includes the Middle East, with the FMCG player being the No 2 biscuit player in the UAE.




Unlimited Portal Access + Monthly Magazine - 12 issues-Publication from Jan 2021

Buy Our Merchandise (Peace Series)

 

Contribute US to Start Broadcasting


It's Voluntary! Take care of your Family, Friends and People around You First and later think about us. Its Fine if you dont wish to contribute and if you wish to contribute then think about the Homeless first and Feed them. We can survive with your wishes too :-). You can Buy our Merchandise too which are of the finest quality.

Debit/Credit/UPI

UPI/Debit/Credit

Paytm

STRIPE

Details
Category: Stock Market


21