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Britannia: FY15 ends in profitable growth - Views on News from Equitymaster
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Britannia: FY15 ends in profitable growth
Jun 4, 2015

Britannia Industries Limited declared its results for the fourth quarter of financial year 2014-15 (4QFY15). The company has reported 14% YoY growth in sales and a 54.8% YoY growth in net profits. Here is our analysis of the results.

Performance summary
  • Britannia clocked a 14% YoY growth in revenues in 4QFY15. For FY15, the revenues were up by 13.7% YoY.
  • The operating profit margin expanded by 3% YoY backed by lower input costs and other expenses (both as a proportion of sales). The operating margin for FY15 improved by 1.9% YoY.
  • The company's net profit was up by 54.8% YoY aided by steep jump in other income. For FY15, net profits (excluding exceptional items arising from sale of land and building) increased by 37% YoY.
  • The company has recommended a dividend of Rs 16 per share of face value Rs 2 each. At the CMP, the dividend yield translates to 0.64%.

Consolidated Financial snapshot
(Rs m) 4QFY14 4QFY15 % change FY14 FY15 % change
Total income 18,124 20,636 13.9% 69127 78584 13.7%
Expenditure 16,440 18,107 10.1% 62855 69945 11.3%
Operating profit (EBITDA) 1,685 2,530 50.1% 6272 8639 37.7%
EBITDA margin (%) 9.3% 12.3% 3.0% 9.1% 11.0% 1.9%
Other income 110 283 156.8% 336 880 161.9%
Interest 15 8 -46.0% 83 39 -53.4%
Depreciation 214 494 130.6% 832 1445 73.7%
Profit before tax 1,566 2,311 47.6% 5,693 8,035 41.1%
Exceptional items -     - 1,461  
Tax 485 637 31.4% 1735.8 2611.1 50.4%
Profit after tax/(loss) 1,081 1,674 54.8% 3,957 6,885 74.0%
Share of profit/(loss) of associates (0) 4   (3) 2  
Minority interest 4 5   1 1  
Net profit/ (loss) 1,077 1,673 55.4% 3,954 6,886 74.2%
Net profit margin (%) 5.9% 8.1% 2.2% 5.7% 8.8% 3.0%
No. of shares (m)         120  
Diluted earnings per share (Rs)*         52.5  
Price to earnings ratio (x)*         47.0  
* On a 12-month trailing basis

What has driven growth in 4QFY15?
  • Britannia clocked a 14% YoY growth in revenues due to the continued growth momentum.

    Cost break-up
    As a % of net sales 4QFY14 4QFY15 Change in basis points
    Total cost of goods 61.6% 57.6% -400.6
    Employee costs 3.3% 3.7% 39.0
    Conversion and other charges 6.1% 5.7% -39.5
    Advertisement costs 8.1% 9.8% 176.6
    Other expenditure 11.6% 10.9% -71.7

  • Its operating margin expanded by 3% YoY backed by a 4% fall in raw material costs and 0.7% reduction in other expenses ( both as a proportion of sales). Among brands, premium cookies and Marie biscuits have done well with only value added offerings lagging behind.

  • The net profits surged by 55% during the quarter on the back of 50% rise in operating profit and 157% jump in other income earned. Although depreciation charges were up by a steep 131%, the tax incidence fell from 31% to 28% during the quarter.
What to expect?
Britannia has been reaping the benefits of robust growth in its innovative and premium biscuit offerings. Even its strong focus on curtailing outsourcing has led to improved profit margins. Going ahead, the company wants to increase in-house production to 60-65% from the present level of 50%. The company is planning to invest Rs 4 bn in additional capacities over the next 1.5 years.

At the price of Rs. 2466, the stock is trading at 43 times our estimated FY17 earnings. At current valuations, the stock is overvalued and therefore we recommend investors not to buy the stock at current price levels.

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