CMP (Rs) 702.00

Target Price (Rs) 765.00

ISIN: INE216A01022

JUNE 12th

, 2013

BRITANNIA INDUSTRIES LIMITED Result Update: Q4 FY13

BUYBUYBUYBUY

Stock Data

Sector FMCG (Food)

BSE Code 500825

Face Value 2.00

52wk. High / Low (Rs.) 752.20/400.00

Volume (2wk. Avg ) 90733

Market Cap ( Rs in mn ) 83924.10

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY13 FY14E FY15E

Net Sales 56154.90 62893.49 69182.84

EBITDA 4270.00 5001.62 5679.38

Net Profit 2338.70 2800.03 3249.66

EPS 19.58 23.42 27.18

P/E 35.85 29.97 25.83

Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX BRITANNIA INDUSTRIES LTD

SYNOPSIS

Britannia Industries Limited engages in the

production and sale of bakery and dairy

products in India and internationally.

Britannia Industries Limited has posted a

net profit of Rs. 878.50 mn for the quarter

ended March 31, 2013 as compared to Rs.

530.20 mn for the quarter ended March 31,

2012.

Britannia Industries Ltd has decided to

recommend a dividend for the year ended

March 31, 2013 at the rate of Rs. 8.50

(Rupees Eight and Paisa Fifty Only) per

equity share of Rs. 2/- each.

Britannia Industries Ltd has launched

Masala Chaas – a light milk-based beverage

in Kerala.

Britannia Industries has launched its range

of Flavored Yoghurt in three exciting flavors

Mango, Vanilla and Strawberry.

Britannia has got 600,000 outlets across

India and is expanding its distribution

network in rural areas, where the company

is seeing growth in market shares.

Net Sales and PAT of the company are

expected to grow at a CAGR of 12% and 20%

over 2012 to 2015E respectively.

Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Britannia Industries Ltd 702.00 83924.10 19.58 35.85 13.18 425.00

Nestle India Ltd 5100.00 491720.20 111.11 45.90 27.34 485.00

Jubilant Foodworks Ltd 1043.50 68309.30 20.70 50.55 15.71 0.00

GlaxoSmithKline Consumer Healthcare 5825.00 244508.80 109.67 53.01 17.97 450.00

Investment Highlights STANDALONE

Results updates- Q4 FY13,

Britannia Industries Limited engages in the

production and sale of bakery and dairy products in

India and internationally, reported its financial

results for the quarter ended 31 MARCH, 2013.

Months MARCH-13 MARCH-12 % Change

Net Sales 15024.20 13218.90 13.66%

PAT 878.50 530.20 65.69%

EPS 7.35 4.44 65.55%

EBITDA 1529.70 905.90 68.86%

The company’s net profit jumps to Rs.878.50 million against Rs.530.20 million in the corresponding quarter

ending of previous year, an increase of 65.69%. Revenue for the quarter rose 13.66% to Rs.15024.20 million

from Rs.13218.90 million, when compared with the prior year period. Reported earnings per share of the

company stood at Rs.7.35 a share during the quarter, registering 65.55% increase over previous year period.

Profit before interest, depreciation and tax is Rs. 1529.70 millions as against Rs.905.90 millions in the

corresponding period of the previous year.

Expenditure :

Break up of Expenditure Rs. Millions

Q4 FY13 Q4 FY12

Cost of Material Consumed

6483.70 6552.40

Purchase of Stock in Trade 2060.00 1329.60

Employee Benefit Expenses

284.40 335.80

Depreciation & Amortization Expense

148.90 125.20

Conversion & Other related Charges

1222.20 1107.10

Advertisement & Sales Promotion

1244.00 1104.10

Other Expenditure 1585.90 1645.30

Latest Updates

• Britannia Industries Ltd has decided to recommend a dividend for the year ended March 31, 2013 at the rate

of Rs. 8.50 (Rupees Eight and Paisa Fifty Only) per equity share of Rs. 2/- each.

• Britannia Industries Ltd has posted a net profit of Rs. 878.50 million for the quarter ended March 31, 2013 as

compared to Rs. 530.30 million for the quarter ended March 31, 2012. Total Income has increased from Rs.

13321.20 million for the quarter ended March 31, 2012 to Rs. 15235.20 million for the quarter ended March

31, 2013.

• Consolidated Financial Results Year ended March 31, 2013

The Group has posted a net profit after taxes, Minority Interest and share of Profit / (Loss) of Associates of

Rs. 2595.00 million for the year ended March 31, 2013 as compared to Rs. 1995.50 million for the year ended

March 31, 2012. Total Income has increased from Rs. 55445.10 million for the year ended March 31, 2012 to

Rs. 62376.50 million for the year ended March 31, 2013.

• Standalone Financial Results Year ended March 31, 2013

The Company has posted a net profit of Rs. 2338.70 million for the year ended March 31, 2013 as compared

to Rs. 1867.40 million for the year ended March 31, 2012. Total Income has increased from Rs. 50327.20

million for the year ended March 31, 2012 to Rs. 56709.60 million for the year ended March 31, 2013.

• Britannia Industries Ltd has launched Masala Chaas – a light milk-based beverage in Kerala. The product has

natural ingredients such as jeera, curry leaves and ginger to provide the authentic home-made taste. The

shelf life is four months and the product will be priced at Rs 15 for a 150-ml pack.

• Britannia’s Tiger brand has roped in actor Salman Khan and re-launched its glucose and other formats with

‘25 per cent daily growth nutrients’. With a new baseline ‘Roz Badho’ (Grow Each Day), Tiger is addressing a

mother’s concern for her child’s nutrition.

Company Profile

Britannia Industries Ltd is Indian company based in 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 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.

Britannia is the leading biscuit manufacturer in the Rs 124 billion Indian bakery market. Its primary business is

bakery consisting of biscuits, bread and cakes. The company operates in the dairy segment through its subsidiary

Britannia Dairy. The dairy segment comprising of milk, butter, cheese, ghee and curds accounts for 4.7% of

Britannia's group turnover.

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 Sugar Out: 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

Global Presence

In March 2007, Britannia Industries Limited formed a Joint Venture with the Khimji Ramdas Group, one of the

largest and the most respected business conglomerates in the Middle East. Britannia and its Associates have

acquired a significant stake in Dubai based Strategic Food International Co. LLC and Oman based Al Sallan Food

Industries Co SAOG. The two companies are key regional players in the biscuits, wafers and cookies segment in

the GCC markets and export their products across the world.

Strategic Food International Co. LLC (SFIC) is one of the largest biscuit and wafer manufacturing companies in

the Middle East. An ISO and HACCP certified company. SFIC is also a proud winner of the Dubai Quality

Appreciation Certificate. It offers a wide spectrum of products under the brand Nutro, which is a leading biscuit

brand in the Middle East.

Al Sallan Food Industries Co is one of the foremost companies for the production of cookies, rolls and chocolates.

The products are well known under the brand name of Baker's Pride.

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 Time pass, 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.

Subsidiary companies

• Al Sallan Food Industries Co. SAOC

• Boribunder Finance and Investments Private

Limited

• Britannia and Associates (Dubai) Private

Company Limited, Dubai

• Britannia and Associates (Mauritius) Private

Limited, Mauritius

• Britannia Dairy Holdings Private Limited,

Mauritius

• Britannia Dairy Private Limited

• Britannia Lanka Private Limited, Sri Lanka

• Daily Bread Gourmet Foods (India) Private

Limited

• Flora Investments Company Private Limited

• Ganges Vally Foods Private Limited

• Gilt Edge Finance and Investments Private

Limited

• International Bakery Products Limited

• J B Mangharam Foods Private Limited

• Manna Foods Private Limited

• Strategic Brands Holding Company Limited,

Dubai

• Strategic Food International Co. LLC, Dubai

• Sunrise Biscuit Company Private Limited

Financial Highlight STANDALONE

Annual Profit & Loss Statement for the period of 2012 to 2015E

(A*- Actual, E* -Estimations & Rs. In Millions)

Value(Rs.in.mn) FY12 FY13 FY14E FY15E

Description 12m 12m 12m 12m

Net Sales 49741.90 56154.90 62893.49 69182.84

Other Income 585.30 554.70 599.08 629.03

Total Income 50327.20 56709.60 63492.56 69811.87

Expenditure -46949.60 -52439.60 -58490.94 -64132.49

Operating Profit 3377.60 4270.00 5001.62 5679.38

Interest -380.70 -377.40 -384.95 -392.65

Gross profit 2996.90 3892.60 4616.67 5286.73

Depreciation -473.20 -570.80 -645.00 -741.75

Profit Before Tax 2523.70 3321.80 3971.67 4544.98

Tax -656.30 -983.10 -1171.64 -1295.32

Net Profit 1867.40 2338.70 2800.03 3249.66

Equity capital 238.90 238.90 239.10 239.10

Reserves 4961.50 6125.00 7166.25 8312.85

Face value 2.00 2.00 2.00 2.00

EPS 15.63 19.58 23.42 27.18

Quarterly Profit & Loss Statement for the period of 30th SEP, 2012 to 30tH JUNE, 2013E

Value(Rs.in.mn) 30-Sep-12 31-Dec-12 31-Mar-13 30-June-13E

Description 3m 3m 3m 3m

Net sales 14166.00 14675.80 15024.20 15324.68

Other income 128.30 114.00 211.00 216.28

Total Income 14294.30 14789.80 15235.20 15540.96

Expenditure -13421.70 -13751.70 -13705.50 -14282.61

Operating profit 872.60 1038.10 1529.70 1258.35

Interest -87.90 -91.40 -103.50 -101.43

Gross profit 784.70 946.70 1426.20 1156.92

Depreciation -142.60 -149.20 -148.90 -151.88

Profit Before Tax 642.10 797.50 1277.30 1005.05

Tax -186.10 -227.90 -398.80 -281.41

Net Profit 456.00 569.60 878.50 723.63

Equity capital 239.10 239.10 239.10 239.10

Face value 2.00 2.00 2.00 2.00

EPS 3.81 4.76 7.35 6.05

Ratio Analysis

Particulars FY12 FY13 FY14E FY15E

EPS (Rs.) 15.63 19.58 23.42 27.18

EBITDA Margin (%) 6.79% 7.60% 7.95% 8.21%

PBT Margin (%) 5.07% 5.92% 6.31% 6.57%

PAT Margin (%) 3.75% 4.16% 4.45% 4.70%

P/E Ratio (x) 44.90 35.85 29.97 25.83

ROE (%) 35.91% 36.75% 37.81% 38.00%

ROCE (%) 70.25% 58.60% 60.09% 60.33%

EV/EBITDA (x) 24.82 19.93 17.04 15.01

Book Value (Rs.) 43.54 53.28 61.94 71.53

P/BV 16.12 13.18 11.33 9.81

Charts

Outlook and Conclusion

� At the current market price of Rs.702.00, the stock P/E ratio is at 29.97 x FY14E and 25.83 x FY15E

respectively.

� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.23.42 and

Rs.27.18 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 12% and 20% over 2012 to 2015E

respectively.

� On the basis of EV/EBITDA, the stock trades at 17.04 x for FY14E and 15.01 x for FY15E.

� Price to Book Value of the stock is expected to be at 11.33 x and 9.81 x respectively for FY14E and FY15E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.765.00 for Medium to Long term

investment.

Industry Overview

The Indian food services industry is estimated to be nearly worth Rs. 75,000 crore (US$ 13.77 billion) and is

growing at a healthy compound annual growth rate (CAGR) of 17 per cent, according to a Franchise India report

released at the Indian Restaurant Congress. It is expected to reach Rs 1,370 billion (US$ 25.16 billion) by 2015.

"In the future, the organised market is expected to grow even faster - at around 20 to 25 per cent per annum,"

according to Mr. Gaurav Marya, President of Franchise India.

The Indian food services industry is anticipated to grow at a CAGR of around 12 per cent during 2012-2015, as

per a RNCOS research report titled, 'Indian Food Services Market Forecast to 2015'.

In addition, India has also been recognised as one of the largest potential market for organic food consumption

worldwide. The organic food is invariably increasing among the Indian retailers, especially with the niche

retailers, as per RNCOS research report titled, 'Indian Organic Food Market Analysis'. The report further

highlighted that the sector will grow at a CAGR of 15 per cent during 2011-2013.

India is fast becoming an important investment destination for foreign players with companies like Starbucks

and American brand Dunkin' Donuts, who have recently entered the country.

Key Players

• LT Foods Ltd plans to invest about US$ 50 million in its African subsidiary over the next three years, as per

Mr. S. Venkatesh, Head of International Trade, LT Foods

• Nutricia International, the Indian subsidiary of French food company, Danone is looking at doubling sales in

the next three years first by consolidating the local brands acquired from Wockhardt, and then introducing

select brands from Danone's international nutrition portfolio, based on its understanding of the Indian

market

• US-based food producer and marketer Cargill India has acquired the iconic Sunflower Vanaspati brand from

Wipro, consolidating its leadership position in the market

• Indian Angel Network (IAN) has made an investment in the Mumbai-based Mexican quick service restaurant,

Poncho. The company has opened 6 outlets and plans to reach 15 by end of 2012.

• New Silk Route (NSR) plans to invest about US$ 100 million to expand its food and restaurant portfolio

Furthermore, India is the fastest growing market for chocolates with 21 per cent increase in volume between

2008 and 2011, as per a report by Mintel. "Chocolate consumption in India has seen an incredible growth rate in

the past few years," said Deepa Dsouza, Trend and Innovation Consultant - India, Mintel.

Food Processing Industry

With a huge agriculture sector, abundant livestock, and cost competitiveness; India is fast emerging as a sourcing

hub of processed food. India's food processing sector covers fruit and vegetables; spices; meat and poultry; milk

and milk products, beverages, fisheries, plantation, grain processing and other consumer product groups such as

confectionery, chocolates and cocoa products, soya-based products, mineral water, high protein foods etc.

The Indian food processing industry accounts for 32 per cent of India's total food market. Estimated to be worth

US$ 121 billion, it is one of the largest industries in India, and is ranked fifth in terms of production, consumption

and exports.

The export of fruits and vegetables from India, including processed food items, have registered a growth of 24

per cent in terms of value to record Rs 8,241 crore (US$ 1.51 billion) in 2011-12 as compared to Rs 6,638 crore

(US$ 1.22 billion) in the previous fiscal year. The exports of fresh grapes increased to Rs 603 crore (US$ 110.72

million), while walnuts were Rs 231 crore (US$ 42.42 million) and fresh mangoes stood at Rs 210 crore (US$

38.56 million).

India is the world's largest milk producer, accounting for around 17 per cent of the global milk production,

according to RNCOS research report titled, 'Indian Dairy Industry Analysis'. The study anticipates that the milk

production in India will grow at a CAGR of around 4 per cent during 2011-2015.

The food processing industries attracted foreign direct investments (FDI) worth US$ 1,661.85 million between

April 2000 to September 2012, according to the latest data published by Department of Industrial Policy and

Promotion (DIPP).

Beverages

• South Korea has become a key market for Indian coffee exports. Indian coffee exports to South Korea have

seen a five-fold increase in volume in the last three years, according to Mr. Jawaid Akhtar, Chairman, Coffee

Board of India

• Coca-Cola plans to invest US$ 5 billion over the next 10 years as it expands its capacities in India. Coca-Cola

expects India to be among its top five markets worldwide by 2020, said Mr. Muhtar Kent, Chairman and Chief

Executive Officer (CEO), Coca Cola

• India's first Small Tea Grower's (STG) Self Help Group(SHG) owned tea factory has become operational in

October 2012, thus marking a new era in the Indian tea processing sector. In addition, 6 more similar ones

are coming up by the end of 2012 under direct support from Indian tea Board

Government Initiatives

According to the Union Budget 2012-13 following initiatives will be taken by the Government under the National

Mission on Food Processing:

• A new centrally sponsored scheme titled 'National Mission on Food Processing' to be started in 2012-13 in

co-operation with the State Governments

• Steps taken to create additional food grain storage capacity in the country

• Subsidies fully provided for effective administration of the proposed Food Security Legislation

• To promote private sector activity and invite foreign investments in the sector the Government allows 100

per cent FDI in the food processing and cold chain infrastructure

The Ministry of Food Processing Industries (MoFPI) has formulated a Vision 2015 Action Plan that includes

trebling the size of the food processing industry, raising the level of processing of perishables from 6 per cent to

20 per cent, increasing value addition from 20 per cent to 35 per cent, and enhancing India's share in global food

trade from 1.5 per cent to 3 per cent.

Some of the other initiatives include:

• The oil meal export from India has registered a growth of 21 per cent to 641,285 tonnes in November 2012,

as compared to 530,456 tonnes in the same period last year, due to improved demand from Japan and South

Korea

• South Africa seeks investment for its flourishing food processing sector from India. India ranks among the

top 10 investing countries in South Africa, with investments estimated at over US$ 6 billion to date

Road Ahead

The major Indian players have invested in the food processing sector. Some of them include ITC, HLL, Cargill,

Venky's India, Godrej, Marico, Priya Foods, MTR, Surya Food & Agro and Haldiram's. Some of the companies that

are active in the organised food retail domain include ITC, Bharti, Reliance, Aditya Birla Group, Subhiksha and the

Future Group. Almost 70 per cent of the sector is dominated by the unorganised and small-scale players,

indicating the huge potential inherent in the Indian food processing sector.

Food suppliers and retail companies plan to scale up business and stay competitive by tapping the large potential

of the domestic market. Out of the total investments worth US$ 750 million in 2012, about US$ 165 million has

gone into purely front-end retail, such as fast moving consumer goods (FMCG), food and beverage firms.

With massive scope for value addition, growing trend in the consumption pattern of processed food products in

India and many fiscal incentives being planned by the Government, this sector is capable of maintaining the

growth momentum in the future.

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.

Firstcall India Equity Research: Email – info@firstcallindia.com

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