Britannia - 4QFY2012 Result Update - Angel Broking

For 4QFY2012, Britannia's top line came in-line with our estimates. However, the company disappointed on the operating front, as its OPM came in at 5.2% vs. our estimate of 7.1% due to higher-than-estimated advertising and sales promotion (A&P) and other expenses. We maintain our Buy view on the stock.

Key highlights for the quarter: For 4QFY2012, Britannia posted decent growth of 16.3% yoy in its net sales to Rs.1,310cr, aided by price hikes and superior product mix. However, the company's OPM declined by 122bp yoy to 5.2% on account of higher A&P and other expenses. A&P and other expenses increased by 95bp yoy and 165bp yoy to 8.4% and 12.5% of sales, respectively. The company's bottom line increased by 22.6% yoy to Rs.53cr, aided by higher other income.

Outlook and valuation: We expect Britannia to post a ~17% revenue CAGR over FY2012-14E and model in margin expansion of 182bp, despite sustained higher ad spends due to the benign input cost environment. Further, in terms of earnings, we expect Britannia to post a robust ~33% CAGR. At the CMP, the stock is trading at 18.8x FY2013 EPS; hence, we recommend Buy on the stock with a target price of Rs.633, based on 23x FY2014E EPS.

Source : Equity Bulls

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