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: Can it maintain the strength? - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jun 6, 2002

    Britannia: Can it maintain the strength?

    Britannia has declared a strong 12% growth in fourth quarter sales fueled by higher sales in both bakery and dairy products. The company's pre tax profits growth of 16% was however, curtailed by a 1% drop in operating margins. Net profits crossed over Rs 2 bn for the full year due to non recurring profits of Rs 1.4 bn. Earnings for the full year before adjustments were higher by 13%.

    (Rs m) 4QFY01 4QFY02 Change FY01 FY02 Change
    Net Sales 3,335 3,740 12.1% 13,325 14,510 8.9%
    Other Income 105 185 76.2% 161 244 51.6%
    Expenditure 3,038 3,445 13.4% 12,174 13,147 8.0%
    Operating Profit (EBDIT) 297 295 -0.7% 1,151 1,363 18.4%
    Operating Profit Margin (%) 8.9% 7.9%   8.6% 9.4% 0.8%
    Interest 37 43 16.2% 101 144 42.6%
    Depreciation 48 69 43.8% 189 240 27.0%
    Profit before Tax 317 368 16.1% 1,022 1,223 19.7%
    Extraordinary items 67 1,237 1746.3% 117 1,368 1069.2%
    Tax 184 215 16.8% 434 559 28.8%
    Profit after Tax/(Loss) 200 1,390 595.0% 705 2,032 188.2%
    Net profit margin (%) 6.0% 37.2%   5.3% 14.0%  
    No. of Shares 27.9 26.9   27.9 26.9  
    Diluted Earnings per share* 29.7 206.7   26.2 75.5  
    P/E Ratio   2.6     7.1  

    Britannia added Rs 167 m to its bottomline by reversal of previous year's liabilities representing a write back of processing charges no longer required. During the year, the company transferred its dairy business to its joint venture company, Britannia New Zealand Foods. Britannia accumulated surplus of Rs 1.3 bn consequent to this transfer. Britannia's stake in this JV, as per its initial plans would be 49%. As a result its numbers are unlikely to get reflected in the consolidated accounts in the coming years.

    The dairy market is becoming competitive after the aggressiveness of Nestle and Amul. However, the margins in the business are comparatively higher with good growth potential compared to bakery business. Dairy business contributes around 13% to its total revenues. Although, the division recorded loss of Rs 34 m in FY02, it is likely to turnaround in the current year. Stiff competition and increasing ad budgets could have triggered the company's move to hive off the business into separate company. However, since the company has already established a brand, the business could have generated good revenues in coming years notwithstanding competition. But as said earlier, revenues from dairy business will not be reflected in Britannia's numbers going forward if the company holds 49% stake.

    Also, with HLL eyeing the bakery products markets and sluggish growth in biscuits segment, revenues from bakery division could come under pressure in the coming years. Britannia has however, managed to lock in good growth on the back of inovative schemes and tie-ups. Going forward, increasing advertisement expenses to boost volume growth could pressurize its operating margins.

    Cost break-up
    (Rs m) 4QFY01 4QFY02 Change FY01 FY02 Change
    Raw material 1,681 2,232 32.8% 6,774 7,761 14.6%
    Staff 252 271 7.5% 953 942 -1.2%
    Others 1,105 942 -14.8% 4,447 4,444 -0.1%
    Total expenditure 3,038 3,445 13.4% 12,174 13,147 8.0%

    During the year, the company provided Rs 56 m on accounts of VRS, which helped it to reduce its staff cost. Raw material cost however, increased sharply by 33% in the fourth quarter. For the full year, the company managed to increase its operating margins by 80 basis points due to lower raw material cost for the first nine months of FY02.

    At the current market price of Rs 538, Britannia is trading at a P/E of 22x (excluding extraordinary income) and market cap to sales ratio of less than 1x . The company concluded its buyback programme successfully. It bought the targeted 1 m shares at an average price of Rs 530. Britannia's staid buyback programme may have been one of the primary reasons for the stock's lacklustre performance. The company has decided to go for another buback at Rs 650 per share not exceeding Rs 920 m for acquiring 2.5 m shares. The new buback programme is over 20% premium to its current market price, which could generate some buying interest in the stock. However, in the long term concerns of depending on only bakery division, which has slow market growth rate could depress valuations.



    Equitymaster requests your view! Post a comment on "Britannia: Can it maintain the strength?". 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

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    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.

    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.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    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


    Detailed Financial Information With Charts