Neutral on Britannia Industries - Motilal Oswal

Britannia Industries (BRIT IN; Mkt Cap USD0.9b, CMP Rs347, Neutral)

Net sales grew 22.5% YoY to Rs10.8b; we estimate volume growth to have been in mid teens.

Gross margin contracted 130bp YoY to 25.9% due to higher prices of key inputs like sugar and vegetable oil.

EBITDA margin expanded 80bp YoY to 5.1% due to lower advertising spend, other expenditure and staff cost. EBITDA grew 45% YoY to Rs552m.

Higher interest cost due to bonus debentures and tax rate dragged profitability at PAT level. Adjusted PAT grew ~3.5% YoY to Rs373m.

We are downgrading our EPS estimates by 4-5% to factor in lower sales traction and lower margins. Our EPS estimates stand revised to Rs10.5 for FY11 (earlier Rs11.1), to Rs15.5 for FY12 (earlier Rs16.2), and to Rs20.6 for FY13 (earlier Rs21.7). On our current estimates, there is likely to be ~35% PAT erosion over FY09-11. The stock trades at 22.3x FY12E and 16.9x FY13E EPS. Maintain Neutral with a target of Rs370 (18x FY13E EPS).

Source : Equity Bulls

Keywords