BRITANNIA INDUSTRIES LTD

Britannia Industries Limited is an Indian food-products

CMP- 4972 Rating- BUY corporation headquartered in Kolkata, West Bengal. It
sells its Britannia and Tiger brands of biscuits, breads,
Target- 5413 Upside- 10.7% and dairy products throughout India and in more than
60 countries across the globe. Britannia has an
estimated market share of 38% in India.
Stock Details
INITIATING COVERAGE
Investment Rational
Bloomberg code BRIT:IN
CMP 4889.13 1. Fall in raw material prices
A 50% fall in edible prices coupled with a 10-15%
Market Cap (Rs. Bn) 1174
increase in wheat prices and a 20-25% increase in
Sector Food sugar prices within a span of 3 to 4 months had
Index Nifty50 overall reduced raw materials cost for the company.
52 w.High/Low 5386 / 4153 So company is either reducing prices or increasing
grammage to boost volume recovery.
Shares in Issue (Mn) 241
P/E 54.35 2. Biscuit market growth
Beta 0.62 India biscuit market revenue size is projected to
grow at a CAGR of 9.0% during 2024-2027. The
Shareholding Mar- Jun- Sep- Dec- demand for biscuit would increase on account of
Patter (%) 23 23 23 23 increasing demand for healthy & nutritional ready-
to-eat food products and manifestation of
Promoters 50.55 50.55 50.55 50.55 demographic window in forthcoming years.
Britannia being a major player in biscuits and 95%
FIIs 19.44 21.29 19.66 18.99 of total revenue being generated by biscuits itself,
company’s growth is substantial.
DIIs 14.22 12.46 13.84 14.84
3. Stronghold in rural market
Rural markets continue to be a stronghold for
Public 15.79 15.69 15.94 15.62
Britannia due to the company’s robust distribution
expansion strategy in these regions, while other
Consolidated Financials
FMCG companies struggle in this sector.
Rs in Bn FY22 FY23 FY24E FY25E Additionally, rural revival is anticipated in the
Revenue 141 163 171 194 coming quarters, supported by higher government
spending and increased urban remittances. No. of
EBITDA 22 28 28 31 outlets has seen a increase from 26.4L in Dec-22 to
OPM 27.6L in Dec-23.
(%) 14.2% 16.0% 14.3% 14.1%
PAT 15 23 21 23 4. Adjacent Business on a strong footing
Bakery Adjacency, Dairy and international continue
EPS (Rs.) 63 96 87 97
to grow strong. In Dairy, Britannia expects strong
P/E (x) 56 65 59 52 traction from its cheese portfolio. International
business continues to grow strong with DD's
1 Year Performance profitable growth across MENA and Rest of
International.
Britannia Nifty50
25%
I believe that these factors will strengthen Britannia in
20% the long run.
15%
Valuation & Recommendation: Based on the above
10%
thesis, I estimate Revenue and operating PAT CAGR of
5% 9% and 9.5% over FY23-26E and BUY rating on the
0% stock with a TP ₹ 5,413/share which implies an upside
of 10.7% from CMP within 1year. At the CMP of Rs.
SEP-23
MAY-23

AUG-23
JAN-23
FEB-23
MAR-23
APR-23

JAN-24
JUN-23
JUL-23

OCT-23
NOV-23
DEC-23

-5%
4972, the stock trades at P/E of 59x/ 52x its FY24E/25E
on our earnings estimates of Rs.87/Rs.97 per share for
FY24E/25E, respectively.

Vedant Gulhane
vedantgulhane2018@gmail.com 8th March, 2024

+91 96570 87993 For Academic Purpose only

 Table of Contents

Investment Summary …………………………………………………………………………………. 1

Table of Contents …………………………………………………………………………………. 2

About the company …………………………………………………………………………………. 3

Key Investment Rationales …………………………………………………………………………………. 4

Summary Ratios …………………………………………………………………………………. 6

Income Statement …………………………………………………………………………………. 7

Balance Sheet …………………………………………………………………………………. 8

Cash Flow Statement …………………………………………………………………………………. 10

 About the Company
Britannia Industries operates in two main segments: bakery products and dairy products. The majority of its revenue,
approximately 95%, comes from the biscuits segment, while the remaining 5% is generated from non-biscuit
products, primarily in the dairy category and international markets.
The company’s dairy business contributes around 5% of its total revenue and its dairy products are available in
100,000 outlets. Britannia Bread holds the top position in the organized bread market, with an annual turnover of
over 100,000 tons in volume and a value of Rs. 450 crores. With 13 factories and 4 franchisees, the bread business
delivers nearly 1 million loaves daily across more than 100 cities and towns in India.
The company’s manufacturing facilities have a combined annual capacity of 433,000 tonnes. Britannia offers a wide
range of biscuit brands, including Vita Marie Gold, Tiger Biscuits, Nutri-choice, Good day, 50-50, Treat, Pure Magic,
Milk Bikis, Bourbon, Nice Time, and Little Hearts, among others.

Growth potential for categories other than Biscuits

Branded Food & Beverages – Leading Indicators

Increase in number of biscuits Lesser time in hand to cater to household needs

consumption occasions from 303 times in with increasing per capita income resulting in
a year in 2018 to 370 times in 2023. higher reliance on packaged food.
 Investment Rational

1. Fall in raw material prices

2. Biscuit market growth

India Biscuit Market registered a growth of 40.78% in value shipments in 2022 as compared to 2021 and an
increase of 8.27% CAGR in 2022 over a period of 2017. In Biscuit Market India is becoming more
competitive as the HHI index in 2022 was 2588 while in 2017 it was 2905. Herfindahl Index measures the
competitiveness of exporting countries. The range lies from 0 to 10000, where a lower index number
represents a larger number of players or exporting countries in the market while a large index number means
less numbers of players or countries exporting in the market. India has reportedly relied more on domestic
production to meet its growing demand in Biscuit Market.

India is unable to meet its increasing needs of this product with domestic production hence we see the trend
is shifting towards import shipment to meet its demand. The import factor of Biscuit Market in 2022 was
0.05 while in 2017 it was 0.04. Indonesia, Malaysia, Bangladesh, Singapore and Belgium were among the
top players of the market in 2022, where Indonesia acquired the largest market share of 39.32% with a
shipment value of 5.46 million USD in 2022. Indonesia also offered the product below the average market
price thus having a competitive advantage over others.

The demand for biscuit would increase on account of increasing demand for healthy & nutritional ready-to-
eat food products and manifestation of demographic window in forthcoming years. Britannia being a major
player in biscuits and 95% of total revenue being generated by biscuits itself, company’s growth is
substantial.
3. Stronghold in rural market
Biscuit Market Share

Distribution Efficiency Drivers

4. Adjacent Business on a strong footing

 Summary Ratios

Margin Analysis 2022 2023 2024 F 2025 F 2026 F

Gross Margins 38.0% 41.2% 40.2% 40.2% 40.2%

EBITDA Margins 15.6% 17.4% 16.2% 16.2% 16.2%

EBIT Margins 14.2% 16.0% 14.3% 14.1% 14.0%

PAT Margins 10.7% 14.2% 12.2% 11.9% 11.7%

Profitability Ratio 2022 2023 2024 F 2025 F 2026 F

Return on assets 26.6% 27.9% 23.7% 23.2% 22.7%

Return on capital 59.2% 49.9% 41.0% 38.6% 36.2%

Return on equity 58.6% 65.0% 48.6% 43.1% 38.5%

Short-Term Liquidity 2022 2023 2024 F 2025 F 2026 F

Current Ratio 1.0 1.1 1.2 1.4 1.5

Quick Ratio 0.6 0.9 1.0 1.1 1.2

Avg. Days Sales Outstanding 9 7 10 10 10

Avg. Days Inventory Outstanding 57 45 43 43 43

Avg. Days Payables 55 55 58 58 58

Cash conversion Cycle 10 -2 -5 -5 -5

Long-Term Solvency 2022 2023 2024 F 2025 F 2026 F

Total Debt / Equity 1.6 1.4 1.2 1.0 0.9

EBITDA / Interest Expense 15 17 22 23 26

Valuation ratio 2022 2023 2024 F 2025 F 2026 F

P/E 56 65 54 52 49
 Valuation

Quarterly Report

In Mn Q3FY23 Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q4FY24 F

Revenue 41,968 40,232 40,107 44,329 42,563 43,853
Direct Expense
COGS 23,647 22,159 23,287 25,318 23,891 25,873
Gross Profit 18,321 18,073 16,820 19,011 18,673 17,980
Indirect Expense
Employee benefits expense 1,782 1,706 1,883 1,599 1,985 2,064
Other expenses 4,607 8,358 8,048 8,688 8,506 8,332
EBITDA 11,932 8,009 6,889 8,724 8,182 7,584
Depreciation 580 653 708 717 781 781
EBIT 11,352 7,356 6,181 8,007 7,401 6,803
EBIT Margin 27.0% 18.3% 15.4% 18.1% 17.4% 16%
Interest 381 349 531 534 311 311
Other Income 522 604 569 513 492 492
PBT 11,493 7,611 6,220 7,986 7,582 6,984
Tax expense 2,169 2,035 1,665 2,121 2,026 1,816
PAT 9,324 5,576 4,555 5,865 5,557 5,168
PAT Margin 22.2% 13.9% 11.4% 13.2% 13.1% 11.8%

Summary Income Statement

In Mn 2020 A 2021 A 2022 A 2023 A 2024 F 2025 F 2026 F

Revenue 1,15,996 1,31,361 1,41,363 1,63,006 1,70,852 1,86,228 2,02989

COGS 69,275 76,261 87,603 95,913 1,02,128 1,11,319 1,21,338

Gross Profit 46,721 55,100 53,760 67,093 68,724 74,909 81,651

Other expenses 23,422 24,734 26,322 32,200 33,796 36,873 40,153

EBITDA 18,432 25,093 22,015 28,309 27,686 30,106 32,736

Depreciation 1,848 1,979 2,005 2,259 3,298 3,831 4,411

EBIT 16,584 23,114 20,010 26,050 24,388 26,275 28,325

Interest 769 1,109 1,443 1,691 1,569 1,569 1,569

Other Income 2,628 3,131 2,217 5,969 5,969 5,969 5,969

PBT 18,443 25,136 20,783 30,328 28,788 30,675 32,725

Tax expense 4,507 6,630 5,624 7,165 7,936 8,456 9,022

PAT 13,936 18,506 15,160 23,163 20,851 22,218 23,703
 Summary Balance Sheet In Mn
Assets 2020 A 2021 A 2022 A 2023 A 2024 F 2025 F 2026 F
Non-current assets

Property, plant and equipment 17,164 16,343 15,841 24,722 28,257 31,876 35,585

Capital work-in-progress 396 1,165 5,357 1,050 1,050 1,050 1,050

Investment property 145 142 140 406 406 406 406

Goodwill 1,390 1,359 1,396 1,282 1,282 1,282 1,282

Other intangible assets 84 85 156 142 142 142 142

Investment in associates and joint
venture 15 23 21 4,952 4,952 4,952 4,952
Financial assets

(i) Investments 18,830 13,852 9,266 10,281 10,281 10,281 10,281

(ii) Loans receivable 2,030 746 1,000 1,500 1,500 1,500 1,500

(iii) Other financial assets 313 301 318 236 236 236 236

Deferred tax assets (net) 196 97 517 573 573 573 573

Tax assets (net) 688 718 449 436 436 436 436

Other non-current assets 425 1,060 992 486 486 486 486

Total non-current assets 41,673 35,891 35,451 46,065 49,600 53,219 56,928
Current assets

Inventories 7,410 10,915 13,675 11,933 11,930 13,004 14,175

Financial assets

Investments 10,088 13,933 8,337 18,010 18,010 18,010 18,010

Trade receivables 3,204 2,573 3,319 3,289 4,753 5,181 5,647

Cash and cash equivalents 812 1,427 1,180 1,024 5,441 10,406 17,760

Bank balances other than (iii) above 416 686 669 956 956 956 956

Loans receivable 11,101 9,466 6,980 5,600 5,600 5,600 5,600

Other financial assets 2,298 3,978 4,280 4,520 4,520 4,520 4,520

Other current assets 1,422 1,220 1,382 1,807 1,807 1,807 1,807

Assets held-for-sale - - - 324 324 324 324

Total current assets 36,750 44,197 39,823 47,462 53,341 59,807 67,799

Total assets 78,422 80,088 75,274 93,527 1,02,942 1,13,026 1,24,727

Equity and Liabilities
Equity

Equity share capital 241 241 241 241 241 241 241

Other equity 43,788 35,236 25,340 35,102 42,361 50,987 61,097

Equity attributable to equity holders
of the parent 44,028 35,477 25,581 35,343 42,904 51,530 61,338

Non-controlling interests 357 363 275 302 302 302 302

Total equity 44,385 35,840 25,856 35,645 42,904 51,530 61,641

Liabilities
Non-current liabilities
Financial liabilities

(i) Borrowings 7,661 7,478 7,070 15,518 15,518 15,518 15,518

(ii) Lease Liabilities - - 138 144 144 144 144

(iii) Other financial liabilities 465 541 526 602 602 602 602

Deferred tax liabilities (net) 127 87 8 19 19 19 19

Govt Grant

Provisions - - 205 256 256 256 256

Total non-current liabilities 8,253 8,105 7,947 16,538 16,538 16,538 16,538
Current liabilities
Financial liabilities

(i)Borrowings 7,480 13,394 17,586 14,287 14,287 14,287 14,287

(ii) Lease Liabilities - - 19 25 25 25 25

(iii) Trade payables
(a) total outstanding dues of micro
enterprises and small enterprises 85 284 628 439 439 439 439
(b) total outstanding dues of creditors
other than micro enterprises and
small enterprises 10,385 12,863 12,601 14,049 16,205 17,663 19,253

(iv) Other financial liabilities 3,119 3,560 3,940 4,962 4,962 4,962 4,962

Other current liabilities 1,501 1,405 1,307 1,763 1,763 1,763 1,763
Government grant

Provisions 2,737 3,875 4,646 5,134 5,134 5,134 5,134

Tax liabilities (net) 478 761 746 684 684 684 684

Total current liabilities 25,785 36,143 41,471 41,344 43,500 44,958 46,548

Total liabilities 34,038 44,248 49,418 57,882 60,038 61,496 63,086

Total equity and liabilities 78,422 80,088 75,274 93,527 1,02,942 1,13,026 1,24,727
 SUMMARY CASH FLOW STATEMENT
Rs in Mn 2020 A 2021 A 2022 A 2023 A 2024 F 2025 F 2026 F
A) Cash flows from operating activities
PBT 18,439 25,128 20,785 30,274 28,788 30,675 32,725
Adjustments for :
Depreciation and amortisation expense 1,848 1,979 2,005 2,259 3,298 3,831 4,411
Finance costs 769 1,109 1,443 1,691 1,137 1,137 1,137
Changes in
Inventories 430 -3,514 -2,748 1,772 2 -1,074 -1,170
Trade receivables 789 614 -722 13 -1464 -428 -466
Other financial assets and other assets -237 -1,708 -443 -648
Trade payables, other financial liabilities, other liabilities and
provisions 292 4,047 640 2,920 2,156 1,458 1,590
Cash generated from operating activities 19,878 24,839 18,864 32,520 33,917 35,599 38,225
Income-tax paid, net of refund -5,033 -6,328 -5,869 -7,258 -7,936 -8,456 -9,022
Net cash generated from operating activities 14,845 18,511 12,995 25,262 25,981 27,142 29,203
B) Cash flow from investing activities
Acquisition of property, plant and equipment, capital work-in-
progress and other intangible assets -2,442 -2,421 -5,502 -7,115 -6,834 -7,449 -8,120
Net cash (used in) / generated from investing activities -15,316 4,613 9,109 -15,171 -6,834 -7,449 -8,120
C) Cash flow from financing activities
Interest paid -360 -1,013 -1,186 -1,957 -1,137 -1,137 -1,137
Dividends paid (including bonus debentures) -4,325 -28,238 -24,849 -13,592 -13592 -13592 -13592
Net cash used in financing activities 579 -22,437 -22,458 -10,284 -14,729 -14,729 -14,729
Net change in cash and cash equivalents 109 686 -354 -192 4,418 4,964 6,355
Effect of exchange rate changes on cash and cash equivalents 57 -24 33 101
Cash and cash equivalents at beginning of the year (Net of bank
overdraft) 587 753 1,415 1,093 1,024 5,441 10,406
D) Cash and cash equivalents at end of the year (Net of bank
overdraft) 753 1,415 1,093 1,002 5,441 10,406 16,760
Cash and cash equivalents at end of the year (Net of bank
overdraft) 753 1,415 1,093 1,002 5,441 10,406 16,760