Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Britannia: Excise hits the Tiger - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Mar 19, 2001

    Britannia: Excise hits the Tiger

    Britannia, the biscuit king with a market share of over 85% (in the organized sector), has reported excellent growth in its financials during the first nine months of the current year. The company is quietly transforming itself from a biscuit company to a ‘complete food company’ by making an aggressive entry into the dairy segment.

    Over the years Britannia has launched several successful brands under its umbrella brand including ‘Milkman’, ‘Good Day’, ‘Tiger’ and ‘Snax’. In terms of understanding the Indian consumer psyche, it has been one of the smartest companies in the FMCG peer group.

    The company’s sales during the past 5 years witnessed a compounded annual growth rate of 18%. During the same period profits grew at a faster rate of 35%. The higher growth rate of profits was due to continuous improvement in profit margins, new product launches and foray into new business areas (like high margins dairy products business). Britannia’s operating margins at 8.5% are comparatively lower than its peers in the industry. This indicates a further growth opportunity in the earnings of the company through operating efficiencies.

    Britannia has reported an outstanding performance during the nine months ended December ’00. The company’s topline increased by 17% and the profits jumped by 42%. Even if we exclude the extraordinary income of Rs 50 m, its profits showed a growth of 23%. This was in line with the bottomline growth figures of most of the FMCG companies. What is more encouraging is the fact that when revenue growth of the FMCG majors slowed down to a single digit, Britannia bucked the trend by reporting a double-digit growth.

    The reason behind Britannia’s success is its key brand ‘Tiger’, which contributes over 20% of its turnover and is growing at about 25% annually. The brand has shown an impressive growth rate in the past few months in terms of volumes. This has been made possible by the launch of small size packs.

    The current budget proposals are however likely to hit the volume growth of the brand. Excise duty on the biscuit with a pack size of less than 100 gms and maximum retail price (MRP) of less than Rs 5 is increased to 16% (from 8% earlier) with effect from March 2001. This could impact its volume growth or margins in the coming months.

    However, volumes of another brand ‘50:50’ have jumped by about 20% after the company decided to sponsor the game show ‘Kaun Banega Crorepati’ (October ’00 to January ’01), through a co-branding initiative. Further, the expansion of dairy product portfolio with the launch of Milkman Sweet Lassi and Cold Coffee is expected to compensate for the low revenue growth in Tiger brand to a certain extent.

    At the current market price of Rs 673, Britannia is trading at a P/E of 28 times its FY01 projected earnings, with a market cap to sales ratio of 1.4 times. We have projected a growth of over 30% in its bottomline on a revenue growth in the range of 12-14%. The company is expected to maintain its outstanding performance in the fourth quarter of the year ending March ’01 and is likely to outperform the entire FMCG industry with its successful brand portfolio. The stock is all set for appreciation, looking at its current and expected financial performance.

    Comparative valuations
    Particulars Britannia Cadbury Nestle HLL
    Price (Rs) 673 449 508 220
    P/E (x) 28.0 30.8 41.3 36.7
    Market Cap/Sales (x) 1.4 2.8 3.1 4.6



    Equitymaster requests your view! Post a comment on "Britannia: Excise hits the Tiger ". Click here!


    More Views on News

    GSK Consumer: On the Recovery Path (Quarterly Results Update - Detailed)

    Jun 20, 2017

    While GSK consumer reported muted revenue growth, volumes are seen to be recovering.

    Britannia: Margin Expansion Trend Continues (Quarterly Results Update - Detailed)

    Mar 11, 2016

    Britannia declared results for the quarter ended December 2015. The company's revenues were up by 10% YoY, while profits came in higher by 51% YoY.

    Britannia: Strong momentum continues... (Quarterly Results Update - Detailed)

    Nov 25, 2015

    Britannia declared results for the quarter ended September 2015 recently. While revenues were up by 12% YoY for the quarter, profits came in lower by 20% YoY.

    A Little Gem in the FMCG Sector (Sector Info)

    Jul 18, 2016

    Will investing in Bajaj Corp yield high returns on account of a rural revival in sight?

    Parag Milk Foods Limited (IPO)

    May 4, 2016

    Should you subscribe to Parag Milk Foods' initial public offering?

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)


    • Track your investment in BRITANNIA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Compare Company With Charts