Biscuit Industry

Britannia Industries BRIT.NS

BRIT IN

EQUITY: CONSUMER RELATED

Plenty of bite left

Global Markets Research

Initiate at Buy with 24% implied upside: solid top line,

rising margins to lead to 32% EPS CAGR

23 April 2015

Rating

Starts at

Target price

Starts at

Currency (INR)

FY16F

Britannia is the market leader in

the biscuits segment in India.

Management's strategy of

growing the company's presence

in the premium segment and

strong control over costs should

translate into 32% EPS CAGR

over FY14-17F. In our opinion,

Britannia is one of the best 'self

help' stories in India's consumer

sector.

Nomura vs consensus

Our FY17F EPS is 4.3% ahead of

consensus.

Research analysts

India Consumer Related

Manish Jain - NFASL

manish.jain@nomura.com

+91 22 4037 4186

FY17F

Actual

Old

New

Old

New

69,127

N/A

79,496

N/A

92,613

Reported net profit (mn)

3,959

N/A

6,903

N/A

6,860

N/A

3,837

N/A

5,304

N/A

6,860

N/A

8,776

FD normalised EPS

32.12

N/A

44.36

N/A

57.19

N/A

73.16

FD norm. EPS growth (%)

54.1

N/A

38.1

N/A

28.9

N/A

27.9

FD normalised P/E (x)

64.4

N/A

46.6

N/A

36.2

N/A

28.3

EV/EBITDA (x)

39.6

N/A

30.2

N/A

23.6

N/A

18.6

Price/book (x)

31.3

N/A

23.4

N/A

17.7

N/A

13.5

0.7

N/A

1.1

N/A

1.4

N/A

1.8

58.9

N/A

74.5

N/A

55.7

N/A

54.1

Dividend yield (%)

ROE (%)

Net debt/equity (%)

4.9

N/A net cash

N/A net cash

New

Anup Sudhendranath - NFASL

anup.sudhendranath@nomura.com

+91 22 4037 5406

8,776

Normalised net profit (mn)

Revenue (mn)

Old

+23.7%

Anchor themes

Valuation: The valuation discount to the sector average seems

unwarranted as earnings growth is towards the top-end

Britannia trades at 28.3x FY17F (EPS: INR73.2) vs. the sector average of 32x

and is likely to...