BRITANNIA , TRING, TRING,TRING

Britannia Industries
Getting tastier

BSE ticker code 500825
NSE ticker code BRITANNIA
Major activity Food and dairy products
Chairman Nusli N Wadia
Equity capital Rs 23.90 crore
52-week high/low Rs 1770/1025 (FV Rs 10)
CMP Rs 1700
Mkt capitalisation Rs 4063.00 crore
Recommendation Buy at declines

Britannia Industries Ltd (BIL), one of the leading producers of biscuits and other bakery products in India, mainly caters to the premium segment. With the launch of Tiger brand, it has taken a plunge in the low-end category, taking competition head on with Parle, which is the leader in this segment. The company has also diversified within dairy and bakery products. Investors should consider the scrip for investment with medium and long-term perspective.
Just consider :
f The per capita consumption of biscuits is extremely low in India. In developed countries it is around 10 kg,whereas it is around 2 Kg p.a. in India. Due to the growing economy, rising income levels, growing nuclear families the ready to eat segment will grow at a faster rate. Owing to big brands like Tiger, Mari Gold, 50-50 , Milk Bikies etc ,the company will surely benefit from this. The company has also forayed into the lucrative Middle-East market through a JV. It is expanding its installed capacity in Himachal Pradesh rapidly to take benefit of tax sops, this will boost its product margins enabling it to compete with unorganized sector.
f Group Danone, France and India’s Wadia group control a majority stake in the company ( with equal stake of 25.1 per cent each). Relations between Danone and the Wadias have not been cordial for past couple of years. This has been a major constraint on Britannia’s growth prospects and it had posed a big uncertainty on the scrip valuation. However, this uncertainty is set to end soon with Danone likely to exit from Britannia. This will be doubly positive as the transaction will unlock the real value of Britannia as also give the company a focused management which can chart out independent growth strategy without any disputes and constraints. The French food giant, Group Danone is in exclusive talks with the American Kraft Foods Inc., the world’s largest cookie maker, to sell its biscuits and cereal-making unit for $ 7.2 billion (5.3 billion euros) in all cash deal. Considering the same valuation for Danone Group’s stake in BIL would imply pricing of Rs 2200 per Britannia share. Many possibilities emerge as a result of above scenario, which should benefit minority shareholders.
F Financial performance, which was adversely affected in the fiscal 2007 with the net profit declining from Rs 146 crore to Rs 107 crore, is recovering the lost ground this year. For the quarter ended March 2007, the company had clocked a crispy 32% growth in its revenues to Rs 599.20 crore, and the operating profit margin increased by a solid 200 bps to 6.5%. The net margin rose 43 percent to Rs 39.8 crore. This trend is expected to continue in the current year and for the fiscal 2008,we expect the company to register a sales turnover of Rs 2700 crore and a net profit of Rs 175.00 crore. EPS would be Rs 72.4. The share price trades at Rs 1700. P/E works out to 24. This is a tasty item for the perspective of mid-term investment.n
Courtesy:Doc uday