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Britannia: Cookie time
Jan 30, 2009

Performance summary
  • Topline jumps 25%YoY each during 3QFY09 and 9mFY09. Healthy blend of volume, mix and price drives the sales.
  • The company witnesses a less than 1% YoY decline in margins during both the period under consideration.
  • Excluding the extraordinary items (VRS and profit on sale of properties), the bottomline is up 8% YoY during 3QFY09


Standalone financials
  3QFY08 3QFY09 % change 9mFY08 9mFY09 % change
Net sales 6,573 8,201 24.8% 18,947 23,623 24.7%
Expenditure 5,989 7,527 25.7% 17,214 21,598 25.5%
Operating profit (EBDITA) 585 675 15.4% 1,734 2,025 16.8%
EBDITA margin (%) 8.9% 8.2%   9.2% 8.6%  
Other income 51.6 54.8 6.2% 200.5 199 -0.7%
Interest 15.8 30 89.9% 50.2 109.7 118.5%
Depreciation 73 86 17.8% 213.5 246.8 15.6%
Profit before tax 548 614 12.1% 1,671 1,868 11.8%
Tax 61 88 45.0% 275 286 4.0%
Extraordinary item (33.4) (64.3) 92.5% -95.5 -183.4 92.0%
Profit after tax/(loss) 454 461 1.7% 1,300 1,398 7.6%
Net profit margin (%) 6.9% 5.6%   6.9% 5.9%  
No. of shares (m) 23.9 23.9   23.9 23.9  
Diluted earnings per share (Rs)*         84.1  
Price to earnings ratio (x)*         16.0  
* 12 month trailing earnings

What has driven performance in 3QFY09?
  • Britannia’s topline jumped 25%YoY each during 3QFY09 and 9mFY09. Healthy blend of volume, mix & price drove the sales. While volume increased 12% YoY during 3QFY09, a 14% YoY growth was seen during 9mFY09. Power brands grew by double digit, with all brands at a critical mass of more than Rs.2 bn in revenue. Britannia continued to extend its portfolio across brands, packs & price points. The sales are in line with our estimates. Unaudited consolidated sales stood at Rs 2.5 bn, while profits were at Rs 1 bn.

  • The company witnessed a less than 1% YoY decline in margins during both the period under consideration. While input prices remained high as a percent of sales, all the other expenses were lower. The industry is operating under a high cost structure. However, better and efficient packaging and cost reductions by shutting manufacturing units and outsourcing aided the company. The margins are in line with our expectations.

    Cost break-up
    As a % of net sales 3QFY08 3QFY09 9mFY08 9mFY09
    Total Cost of goods 59.4% 62.5% 59.9% 61.4%
    Staff Cost 3.5% 3.0% 3.5% 3.1%
    Advertising 7.7% 6.6% 6.9% 6.5%
    Other Expenditure 20.5% 19.6% 20.5% 20.5%

  • Excluding extraordinary items (VRS and profit on sale of properties), the bottomline was up 8% YoY during 3QFY09. The same was up 13% YoY during 9mFY09. The profits are lower than our estimates mainly on account of higher interest costs.

What to expect?
At the current price of Rs 1,345 the stock is trading at a price to earnings multiple of 9.6 times our FY11 estimates. The company continues to capitalize on its power brands and also has extended its reach offshore. It has managed to hold its market share at 36% in the last couple of years. Britannia has also strengthened its bread, cakes and rusk portfolio. Brand building, innovations, portfolio expansion and expansion of its geographies would be the key growth driver going forward. We remain positive on the stock.

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