Britannia Industries Ltd now has aggressively reinvested some margin surplus on adjacencies and new categories to capitalize on the opportunity.

Chirag Batavia • 11 January 2021

Britannia Industries Ltd

 The lockdown phase triggered resurgence of the biscuit category, which otherwise was showing fatigue pre-Covid, and triggered penetration increase in the packaged foods space. We continue to build moderation in biscuits demand (post the spike in in-home consumption) but still much better than pre-Covid level.

 BRIT now has aggressively reinvested some margin surplus on adjacencies and new categories to capitalize on the opportunity.

 With the opening-up of the economy, other food categories have started to see demand recovery.

 BRIT has ramped-up its direct reach to more than pre-Covid levels (there was some fall in March-quarter due to disruption). They have also strengthened their rural distribution. They have also ramped-up their SKUs and replenishment levels back to pre-Covid levels.

 BRIT is looking to ramp-up media spends and will be focusing on select brands initially.

 In Q3FY21, we expect consolidated EBIDTA margin to expand 83 bps yoy aided by 56 bps expansion in Gross Margin (GM) and operating leverage gain.

Britannia Industries Ltd: ADD
Dated: 11th January 2021
CMP: Rs.3575
Fair Value: Rs.4150
Potential Upside: 16%
Market Cap: Rs. 86,110 Cr
Time Frame: 12 months

Note: The above is a brief note on the company, based on the inputs of KIE research report dated 21st October, 2020 & 6th January 2021, which is available on their website at: https://www.kotaksecurities.com/ksweb/ResearchCall/Fundamental.       
Disclaimer: http://bit.ly/2n5AxIE



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