Britannia gains 12% intraday; brokerages advise to 'buy' the stock post strong Q4 results

MUMBAI: Brokerages have raised EPS and target price on Britannia Industries on the back of strong performance in previous quarter.

The stock rallied 11.86 per cent in early trade after the company reported consolidated net profit of Rs 167 crore, up 54.6 per cent, as against a net profit of Rs 108 crore in the same quarter last fiscal year.

The stock ended the day at Rs 2,431.15; up 6.38%.

Consolidated net sales rose to Rs 2,030 crore, up 14 per cent, as compared to Rs 1,780 crore, in the corresponding quarter a year ago.

It was yet another strong quarter for Britannia Industries with results ahead of Street’s expectations.

"We continue to like Britannia as a strong play on a category with improving dynamics. Another outperformance drives another round of EPS upgrades – we raise our FY2016-18E EPS estimates by 7-11 per cent," said Kotak Institutional Equities report.

It has reiterated ‘ADD’ with a revised target price of Rs 2,500 from Rs 2,050) with implied target PE is 32X FY2017E.

Even as the stock has delivered handsome 170 per cent returns since April 2014, Kotak expects it to outperform the sector.

Barclays has maintained Equal Weight rating on the stock. The company’s gross margin boost was driven by input cost tailwinds and product mix. Premium push is the key for future growth while Nutrichoice expansion is positive, it says.

Barclays has raised target to Rs 2,102 from Rs 1,922 on the stock.

The company’s sales growth of 13.9 per cent was among the strongest in the sector and operating margins also showed a 300bp y-y increase, led by a 400bp y-y improvement in gross margin, says Nomura report.

"This is the ninth consecutive quarter that the company has delivered a year-on-year margin improvement. We remain confident that over the medium term it can continue to improve its profitability and we maintain our BUY rating on the stock," the report said.

The brokerage has target price of Rs 2,560 on the stock.

Analysts at Prabhudas Lilladher estimates 200bps margin expansion and 32 per cent PAT CAGR for the company in standalone operations over FY15-17.

According to the PL report, 320bps expansion in gross margins and 60bps decline in other expenses has enabled 190bps margin expansion despite 220bps higher adspend. Volume growth of ~9 per cent looks impressive, given the slowdown in demand across products.

"We expect input costs tailwind to sustain, given benign prices of Wheat, SMP, Palmoil and Sugar. We expect BRIT to gain from investments in new units, distribution expansion and new launches. We value the stock at 32xMarch 17EPS, given 41 per cent ROE, 65 per cent ROCE and 40 per cent dividend payout," the report added.

It has maintained ‘BUY’ rating on the stock with price target of Rs 2,500.