company update britannia industries€¦ · daily avg volume (nos.) 9,18,193 daily avg turnover...

Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY<GO>. Please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.

CMP: Rs 3,323 as of (May 28, 2020)

TP: Rs 3,900 () 12 months

Rating: BUY () Upside: 17.4 %

India Equity Research | Consumer Goods

May 28, 2020

Company Update

Britannia Industries Refer to important disclosures at the end of this report

Keep munching

Change in Estimates

EPS Chg FY20E/FY21E (%) 0.7/11.6

Target Price change (%) 20

Target Period (Months) 12

Previous Reco BUY

Emkay vs Consensus

EPS Estimates

FY20E FY21E

Emkay 57.3 68.7

Consensus 57.5 63.8

Mean Consensus TP (12M) Rs 3,140

Stock Details

Bloomberg Code BRIT IN

Face Value (Rs) 1

Shares outstanding (mn) 240

52 Week H/L 3,584 / 2,100

M Cap (Rs bn/USD bn) 799 / 10.55

Daily Avg Volume (nos.) 9,18,193

Daily Avg Turnover (US$ mn) 35.3

Shareholding Pattern Mar '20

Promoters 50.6%

FIIs 14.7%

DIIs 13.4%

Public and Others 21.3%

Price Performance

(%) 1M 3M 6M 12M

Absolute 4 12 7 15

Rel. to Nifty 3 32 37 45

We increase Britannia’s (BRIT) estimates by 12% and raise our TP to Rs3,900 (from

Rs3,250), factoring in stronger-than-expected growth trends in its portfolio, acceleration in

market share gains and multiple tailwinds for higher growth and margin expansion.

BRIT is emerging as the biggest beneficiary from the disruption, as packaged foods

consumption is growing strongly, led by higher in home consumption and lesser avenues

for out-of-home consumption. The shift from unorganized/street food to packaged foods

may sustain even post lockdown given higher preference for hygiene and trusted brands.

In addition, BRIT’s better distribution capabilities with strong direct reach, wide portfolio

and faster innovation makes it well-placed to accelerate share gains. Margin outlook has

also improved on benign input prices, steady cost-saving culture, reduced competitive

activity (reduction in trade schemes) and better portfolio mix

Valuations at 41xFY22 are still attractive given the improved growth outlook and likely

upsides to earnings. Re-iterate BUY and maintain BRIT as an EAP high conviction idea.

Relative price chart

Source: Bloomberg This report is solely produced by Emkay Global. The following person(s) are responsible for the production of the recommendation:

Ashit Desai

[email protected]

+91 22 6612 1340

-20

-6

8

22

36

50

2100

2355

2610

2865

3120

3375

Jun-19 Jul-19 Sep-19Nov-19Jan-20Mar-20May-20

%Rs

Britannia Industries (LHS) Rel to Nifty (RHS)

Growth acceleration on the cards; biggest beneficiary of surge in packaged foods

consumption: BRIT is witnessing a strong acceleration in growth as per our channel checks,

driven by the surge in packaged foods consumption from higher in-home consumption and

lack of other out-of-home consumption avenues. This is driving increasing consumer shift

toward packaged foods which offer hygiene and trusted brands vs. unorganized/street food.

BRIT’s wide and most affordable and healthy portfolio, leadership across categories, stronger

innovation pace and better distribution capabilities make it best-placed to emerge as a big

winner from this disruption.

Multiple drivers for margin expansion: We also see multiple drivers for margin expansion

over FY21-22E period from benign input prices, reduction in competitive activity, higher cost-

savings focus (lower discretionary spends) and improvement in portfolio mix. Higher

production of large packs and fast moving Good Day vs. glucose and LUPs and reduction in

trade schemes are also likely to boost margins in the near term. Our estimates factor in a

margin expansion of 180bps over FY20-FY23E for BRIT.

Increase FY21-22 forecasts by 12%; reiterate Buy: We increase FY21-22E earnings by

12% and expect consensus growth and earnings expectation to see sharp upgrades. The

stock has recovered from its lows but has underperformed over last 2-3 years and valuations

at 41x FY22E EPS still appear attractive given the improved growth outlook. We reiterate Buy

and increase our TP to Rs3,900 from Rs3,250 based on 47x Jun-22E earnings

Group stress a concern but exposure is limited and less likely to increase: We estimate

group debt to be ~Rs70bn (based on FY19 annual reports) with BRIT exposure limited to ICD

of Rs4.5bn (no promoter pledge). While this has been a key investor concern, we note BRIT

management has maintained that ICDs to group will not increase (reduced from Rs6.8bn to

Rs4.5bn in 1HFY20) and the recent step-up in dividend will likely aid promoters address

liquidity issues.

Please see our sector model portfolio (Emkay Alpha Portfolio): Consumer Goods & Retail (page 11)

Financial Snapshot (Consolidated)

(Rs mn) FY19 FY20E FY21E FY22E FY23E

Revenue 1,10,547 1,15,593 1,29,657 1,44,218 1,60,027

EBITDA 17,334 18,490 22,211 25,186 28,424

EBITDA Margin (%)

15.7 16.0 17.1 17.5 17.8

APAT 11,555 13,751 16,485 18,893 21,488

EPS (Rs) 48.1 57.3 68.7 78.7 89.5

EPS (% chg) 15.1 19.0 19.9 14.6 13.7

ROE (%) 30.2 29.1 29.8 30.1 30.0

P/E (x) 69.1 58.0 48.4 42.2 37.1

EV/EBITDA (x) 45.6 42.4 35.1 30.8 27.0

P/BV (x) 18.8 15.4 13.6 11.9 10.5

Source: Company, Emkay Research

http://www.emkayglobal.com/

Britannia Industries (BRIT IN) India Equity Research | Company Update


May 28, 2020 | 2

Story in Charts

Exhibit 1: Biscuits most preferred and large beneficiary of shift to packaged foods from unorganized / street food

Source: Company reports, Emkay Research

Exhibit 2: Consistently gaining market share

Source: Company reports, Emkay Research

Exhibit 3: Direct reach best amongst peers; has doubled over last 5 years

Source: Company reports

Exhibit 4: Post demonetization recovery has been faster and indicates BRIT’s strong distribution capabilities


Exhibit 5: Cost savings (indexed) have resulted in 500bps margin gain


Exhibit 6: Exposure to group has reduced and is less likely to increase

Source: Emkay Research, Company

Exhibit 7: Higher dividend payout should address promoters liquidity pressure in near term


Exhibit 8: Valuations at 5yr average


350

340

21

40

Large packaged food categories (Rsbn)

Biscuits Savoury snacks

Breakfast cereals Instant Noodles

2076

924

Food service market (Rsbn)

Unorganised food service market

Organised food service market

7.310

12.615.5

18.421 21.7

0

5

10

15

20

25

Ma

r-14

Ma

r-15

Ma

r-16

Ma

r-17

Mar-

18

Ma

r-19

Dec-1

9

Direct reach (In Lakhs)

-10%

-5%

0%

5%

10%

15%

Britannia HindustanUnilever

Dabur Colgate Marico

2HFY17 (post demon) FY18 FY19 9MFY20

1

1.82.2

3.1

4.5 4.5 4.7

0

1

2

3

4

5

FY14 FY15 FY16 FY17 FY18 FY19 FY20(Target)

Cost efficiency target (Indexed)

2,750 3,250

4,500

3,500

6,850

4,500

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

FY15 FY16 FY17 FY18 FY19 1HFY20

Inter-company deposits to Group companies (Rs. mn)

1,919 1,920 2,400 2,640 3,001

3,602

8400

8 810 11 13

15

35

0

10

20

30

40

0

2,000

4,000

6,000

8,000

10,000

FY15 FY16 FY17 FY18 FY19 FY20 Apr-20

Dividend (Rs. mn) - LHS Dividend per share (Rs.) - RHS

0.0

20.0

40.0

60.0

80.0

Ap

r/10

Ap

r/11

Ap

r/12

Ap

r/13

Ap

r/14

Ap

r/15

Ap

r/16

Ap

r/17

Ap

r/18

Ap

r/19

Ap

r/20

1yr Fwd PE (x) Average PE +1 SD

-1 SD +2 SD -2 SD




May 28, 2020 | 3

Growth acceleration on the cards; best play on the surge in packaged foods demand

Our channel checks indicate strong demand trends for biscuits and particularly for Britannia,

making it best-placed to emerge as the biggest winner from the Covid-19 disruption. The

lockdown is driving higher in-home consumption of packaged/convenience foods, resulting in

stronger growth in the packaged foods categories. Biscuits, being affordable and healthy, are

likely to be the most preferred, and hence are witnessing stronger growth. Biscuits are also likely

to be the biggest beneficiary of the shift in consumption from unorganized/street food to

packaged foods over the medium term due to a lack of other consumption avenues. Even post

lockdown, while some categories may see a normalization in demand as consumers move out

of homes, given the increased preference for hygiene, packaged foods like biscuits should

continue to see stronger demand, in our view.

BRIT is best-placed to ride this trend with a stronger portfolio, faster innovation pace, and distribution capabilities

BRIT enjoys leadership in the category and has been consistently gaining market share in

biscuits, driven by its steady portfolio and distribution expansion. Stronger portfolio and

consistent efforts of increasing direct reach (2mn+ outlets), which has more than doubled over

the last 5 years (significantly higher than peers), makes it strongly placed to further strengthen

its shares from smaller players as well as the larger peers.

Exhibit 9: Biscuits most preferred and large beneficiary of shift to packaged foods from unorganized / street food


Exhibit 10: Consistent increase in market share


Exhibit 11: Direct reach has more than doubled in last 5 years


Exhibit 12: Strong expansion in rural continues


350

340

21

40

Large packaged food categories (Rsbn)

Biscuits Savoury snacks

Breakfast cereals Instant Noodles

2076

924

Food service market (Rsbn)

Unorganised food service market

Organised food service market

7.310

12.615.5

18.421 21.7

0

5

10

15

20

25

Ma

r-14

Ma

r-15

Ma

r-16

Ma

r-17

Ma

r-18

Ma

r-19

Dec-1

9

Direct reach (In Lakhs)

7 810

14

1821

0

5

10

15

20

25

Ma

r-15

Ma

r-16

Ma

r-17

Ma

r-18

Ma

r-19

Dec-1

9

No. of Rural Preferred Dealers (in '000)




May 28, 2020 | 4

Better recovery post demon gives confidence of BRIT’s capabilities

We note even post demonetization, BRIT’s recovery and growth momentum was one of the

fastest within the consumer peers, driven by its stronger distribution network and lower presence

on the wholesale. Efforts on increasing direct reach, increased investments in rural and

underpenetrated markets are likely to pay off further during this disruption, in our view.

Exhibit 13: Sales growth post demonetization has been highest after Nestle


Exhibit 14: Volume growth has been strong in FY18-19; 9MFY20 volumes marginally lower due to grammage reductions


Strong balance sheet and cash position provides room for inorganic expansion. BRIT enjoys a

stronger portfolio with higher shares in premium biscuits, a faster innovation pace and ambition

to expand portfolio into adjacent categories. The recent entry into new categories of croissants,

snacks, milk shakes and wafer biscuits have so far seen limited success and are yet to scale up.

We believe the increased shift to packaged food consumption offer a better opportunity for BRIT

to get aggressive in new categories and also explore inorganic expansion into emerging

packaged foods.

Increasing dominance of its core portfolio and a strong balance sheet also provides room to

further leverage its brand equity and positive demand trends to scale up its new launches/enter

new categories once supplies and production are normalized. While innovations may take a

backseat in the near term, we believe the disruption driving consumer preference increasingly

toward trusted brands with hygiene and quality should benefit BRIT to expand its portfolio and

meet its ambition of becoming a total foods company.

Exhibit 15: Strong cash generation provides room for step up in dividend / inorganic expansion


Exhibit 16: New categories may see more aggression once production supply constraints are behind and normalcy returns


-5%

0%

5%

10%

15%

20%


Dabur Colgate Nestle Marico


-10%

-5%

0%

5%

10%

15%


Dabur Colgate Marico


0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

FY

15

FY

16

FY

17

FY

18

FY

19

FY

20E

FY

21E

FY

22E

FY

23E

Rs. m

n

CFO FCF Cash




May 28, 2020 | 5

Multiple tailwinds for margin expansion

Our channel checks also indicate BRIT is focusing more on its stronger and faster moving brands

including Good Day, Marie and creams with the production of lower-end glucose category and

smaller SKUs being curtailed. These are likely to improve its portfolio mix in the near term, driving

margin gains. Reduction in trade schemes and reduced competitive activity, along with lower

input prices, should also help drive stronger margin expansion in FY21. Prices of key inputs such

as wheat, sugar, palm oil and milk are down 4-5% compared to average FY20 prices.

Lastly, BRIT has exhibited a strong cost-saving culture driving efficiencies and reduction in

overheads by ~500 bps over the last 6 years. Focus on reducing plastic, distance to market,

increasing production efficiencies through higher in-house manufacturing have resulted in

improved profitability. Continued focus on cost efficiencies, benefits of the scale-up of the

Ranjangaon facility and further ramp-up in in-house manufacturing are likely to lead to more

margin expansion in the future.

Exhibit 17: Margins to expand further on better mix, benign input costs and cost efficiencies


Exhibit 18: Input prices are softening


Exhibit 19: Consistent cost-saving targets driving margin gains


Exhibit 20: More than 300bps reduction in freight and conversion costs; other overheads increase led by accounting change


34%36% 38% 40% 40% 40% 38% 38% 41% 40% 41% 41% 41%

5% 6% 7% 9% 11%14% 14% 15% 16% 16% 17% 17% 18%

0%

10%

20%

30%

40%

50%

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19

FY

20e

FY

21e

FY

22e

FY

23e

Gross Margin EBITDA Margin

70

90

110

130

150

170

Jan

/19

Fe

b/1

9

Ma

r/19

Ap

r/19

May/1

9

Jun

/19

Jul/19

Au

g/1

9

Se

p/1

9

Oct/19

Nov/1

9

Dec/1

9

Jan

/20

Fe

b/2

0

Ma

r/20

Ap

r/20

26/M

ay/2

0

Wheat Sugar Palm Oil SMP

1

1.82.2

3.1

4.5 4.5 4.7

0

1

2

3

4

5

FY14 FY15 FY16 FY17 FY18 FY19 FY20(Target)

Cost efficiency target (Indexed)

2%

3%

4%

5%

6%

7%

8%

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

FY

19

Freight costs Conversion costs Other Overhead costs




May 28, 2020 | 6

Valuations still attractive given stronger growth vs. peers; re-iterate top Buy in consumer

We increase our FY21-22 earnings forecast by 12% and now bake in a sales and earnings CAGR

of 11% and 16%, respectively (8% higher than consensus). We believe that further upsides to

our forecast are possible from faster market share gains, rising shift to packaged foods driving

higher growth in biscuits/cakes and margin gains from lower input prices and competition.

On our revised estimates, stock trades at 41x FY22E EPS which looks attractive given the

improved growth outlook. Improved growth outlook, along with BRIT’s better execution, can drive

further re-rating, in our view. We reiterate Buy/OW in EAP and raise our TP to Rs3,900 from

Rs3,250, based 47x June-22 EPS.

Loans to group businesses, a key concern for investors

The stock has witnessed an overhang from higher group debt and loans given by BRIT to group

businesses (ICDs of Rs9bn in H1FY20) with expectations it may increase post Covid-19

disruption due to increased stress in group’s airline and real estate businesses. We estimate

group debt to be ~Rs70bn (based on FY19 annual reports). While this has been a key investor

concern, we note BRIT management has maintained that ICDs to group companies will not

increase (ICDs in H1FY20 had reduced from Rs6.8bn to Rs4.5bn) and the recent step-up in

dividend will likely aid promoters address liquidity issues in other group businesses.

Exhibit 21: BRIT PE chart


Exhibit 22: Valuations at 5 yr average; provide scope for re-rating


Exhibit 23: ICD’s to group companies have reduced in 1H, mgmt. has maintained it won’t increase


Exhibit 24: Recent increases in dividends may help promoters address group liquidity concerns


0

1000

2000

3000

4000

5000

Ma

y-1

0

Ma

y-1

1

Ma

y-1

2

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8

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0

60x

50x

40x

30x0.0

10.020.030.040.050.060.070.0

Ap

r/10

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r/11

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r/15

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r/16

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r/18

Ap

r/19

Ap

r/20

1yr Fwd PE (x) Average PE +1 SD

-1 SD +2 SD -2 SD

2,750 3,250

4,500

3,500

6,850

4,500

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

FY15 FY16 FY17 FY18 FY19 1HFY20

Inter-company deposits to Group companies (Rs. mn)

1,919 1,920 2,400 2,640 3,001

3,602

8400

8 810 11 13

15

35

0

10

20

30

40

0

2,000

4,000

6,000

8,000

10,000

FY15 FY16 FY17 FY18 FY19 FY20 Apr-20

Dividend (Rs. mn) - LHS Dividend per share (Rs.) - RHS




May 28, 2020 | 7

Exhibit 25: No change in promoter holding and zero pledge gives comfort

Britannia FY17 FY18 FY19 Dec-19 Mar-20

Promoter Holding % 50.72% 50.70% 50.66% 50.63% 50.63%

Shares Pledged % 0% 0% 0% 0% 0%


Exhibit 26: Group companies have ~Rs65bn of debt

Rs bn

FY19 1HFY20

Go Airlines

Bombay Dyeing

Bombay Burmah

Go Airlines

Bombay Dyeing

Bombay Burmah

Sales 62.6 44.7 2.77 NA 12.3 1.28

PBT -1.5 12.32 -0.18 NA 1.01 -0.27

PAT -1.5 12.2 -0.19 NA 1.1 -0.27

Networth -3.1 1.8 2.57 NA 0.7 2.2

Debt 18.1 39.7 4 NA 40.4 4.2

Cash 3.8 0.7 0.1 NA 0.35 0.2


Exhibit 27: Revision in estimates

Y/E, Mar (Rs. mn) FY20E FY21E FY22E

Earlier Revised % Change Earlier Revised % Change Introduced Revised % Change

Revenues 112,764 115,593 2.5 117,758 129,657 10.1 130,722 144,218 10.3

EBITDA 18,159 18,490 1.8 19,696 22,211 12.8 22,422 25,186 12.3

EBITDA Margin (%) 16.1 16.0 -10 bps 16.7 17.1 40 bps 17.2 17.5 30 bps

APAT 13,661 13,751 0.7 14,727 16,485 11.9 16,934 18,893 11.6

EPS 56.9 57.3 0.7 61.3 68.7 11.9 70.5 78.7 11.6


Exhibit 28: Key assumptions

FY17 FY18 FY19 FY20E FY21E FY22E FY23E

Domestic Revenue (Rs mn) 84,144 93,041 104,825 109,870 123,643 137,591 152,725

Growth 9% 11% 13% 5% 13% 11% 11%

Subsidiaries (Rs mn) 6,397 6,099 5,722 5,722 6,014 6,627 7,302

Growth -5% -6% 0% 5% 10% 10%

Total Revenue (Rs mn) 90,541 99,140 110,547 115,593 129,657 144,218 160,027

Growth 8% 9% 12% 5% 12% 11% 11%


Exhibit 29: Relative valuations

Price (Rs)

Mcap (Rs bn)

Reco TP

(Rs)

EPS (Rs) P/E (x) EV / EBITDA (x)

FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E

Asian Paints 1,619 1,553 Hold 1,650 28.6 34.2 39.1 56.7 47.3 41.5 36.1 30.3 26.5

Berger Paints 455 442 Sell 430 6.9 8.7 10.1 65.9 52.2 45.1 41.0 32.8 28.4

Britannia 3,220 774 Buy 3,900 57.3 68.7 78.7 56.2 46.9 40.9 41.1 34.1 29.8

Colgate 1,279 348 Buy 1,500 30.0 31.2 35.5 42.6 41.0 36.0 28.7 26.4 23.5

Dabur 429 758 Hold 465 8.7 9.8 11.2 49.1 43.8 38.5 41.8 36.0 30.8

Emami 196 88 Hold 240 11.5 11.3 11.9 17.0 17.4 16.4 11.6 11.4 10.5

GCPL 575 588 Hold 600 13.8 15.6 17.6 41.6 36.8 32.6 28.3 25.5 22.7

HUL 1,998 4,691 Hold 2,300 31.2 35.7 42.0 64.1 55.9 47.6 48.2 42.5 36.4

ITC 192 2,362 Buy 240 11.7 12.1 13.4 16.5 15.9 14.3 11.9 11.2 9.9

Marico 323 417 Hold 320 8.3 8.5 9.5 38.9 37.8 34.0 27.8 26.3 23.8

Nestle 16,717 1,612 Sell 15,000 206.8 235.7 275.9 80.8 70.9 60.6 56.3 50.5 43.6

Pidilite 1,403 713 Sell 1,170 22.7 25.2 29.2 61.8 55.7 48.0 45.5 41.2 35.5

Radico Khaitan 318 42 Buy 400 15.8 17.5 22.1 20.0 18.1 14.4 12.5 11.4 9.2

United Breweries 931 246 Buy 1,230 17.0 20.4 27.0 54.8 45.7 34.5 27.4 23.5 18.8

United Spirits 578 420 Buy 660 11.9 13.0 16.5 48.7 44.6 35.0 28.9 27.0 22.1





May 28, 2020 | 8

Key Financials (Consolidated)

Income Statement

Y/E Mar (Rs mn) FY19 FY20E FY21E FY22E FY23E

Revenue 1,10,547 1,15,593 1,29,657 1,44,218 1,60,027

Expenditure 93,213 97,102 1,07,446 1,19,032 1,31,603

EBITDA 17,334 18,490 22,211 25,186 28,424

Depreciation 1,619 1,825 1,982 2,129 2,320

EBIT 15,715 16,665 20,229 23,056 26,103

Other Income 2,065 2,637 3,018 3,446 3,904

Interest expenses 91 720 970 970 970

PBT 17,689 18,582 22,277 25,532 29,037

Tax 6,125 4,831 5,792 6,638 7,550

Extraordinary Items 0 0 0 0 0

Minority Int./Income from Assoc. (10) 0 0 0 0

Reported Net Income 11,555 13,751 16,485 18,893 21,488

Adjusted PAT 11,555 13,751 16,485 18,893 21,488

Balance Sheet


Equity share capital 240 240 240 240 240

Reserves & surplus 42,292 51,586 58,467 66,556 76,039

Net worth 42,533 51,826 58,708 66,797 76,279

Minority Interest 327 327 327 327 327

Loan Funds 1,380 1,380 1,380 1,380 1,380

Net deferred tax liability 263 263 263 263 263

Total Liabilities 44,502 53,796 60,677 68,766 78,249

Net block 16,883 19,558 21,076 22,446 23,626

Investment 14,763 14,763 14,763 14,763 14,763

Current Assets 29,252 35,951 43,040 51,873 62,471

Cash & bank balance 1,098 7,545 11,358 16,800 23,717

Other Current Assets 2,906 3,831 4,139 4,458 4,805

Current liabilities & Provision 17,408 17,488 19,214 21,328 23,624

Net current assets 11,844 18,463 23,826 30,545 38,847

Misc. exp 0 0 0 0 0

Total Assets 44,502 53,796 60,677 68,766 78,249

Cash Flow


PBT (Ex-Other income) (NI+Dep) 15,625 15,945 19,259 22,086 25,133

Other Non-Cash items 0 0 0 0 0

Chg in working cap (2,648) (173) (1,550) (1,277) (1,386)

Operating Cashflow 10,616 16,123 17,887 20,716 23,392

Capital expenditure (4,030) (4,500) (3,500) (3,500) (3,500)

Free Cash Flow 6,586 11,623 14,387 17,216 19,892

Investments (3,970) 0 0 0 0

Other Investing Cash Flow (2,043) (2,637) (3,018) (3,446) (3,904)

Investing Cashflow (7,978) (4,500) (3,500) (3,500) (3,500)

Equity Capital Raised 0 0 0 0 0

Loans Taken / (Repaid) (402) 0 0 0 0

Dividend paid (incl tax) (3,734) (4,457) (9,604) (10,805) (12,005)

Other Financing Cash Flow 823 0 0 0 0

Financing Cashflow (3,404) (5,177) (10,574) (11,775) (12,975)

Net chg in cash (766) 6,447 3,813 5,442 6,917

Opening cash position 1,864 1,098 7,545 11,358 16,800

Closing cash position 1,098 7,545 11,358 16,800 23,717





May 28, 2020 | 9

Key Ratios

Profitability (%) FY19 FY20E FY21E FY22E FY23E

EBITDA Margin 15.7 16.0 17.1 17.5 17.8

EBIT Margin 14.2 14.4 15.6 16.0 16.3

Effective Tax Rate 34.6 26.0 26.0 26.0 26.0

Net Margin 10.5 11.9 12.7 13.1 13.4

ROCE 44.1 39.3 40.6 40.9 40.8

ROE 30.2 29.1 29.8 30.1 30.0

RoIC 64.1 57.4 63.2 66.1 69.7

Per Share Data (Rs) FY19 FY20E FY21E FY22E FY23E

EPS 48.1 57.3 68.7 78.7 89.5

CEPS 54.9 64.9 76.9 87.6 99.2

BVPS 177.1 215.9 244.5 278.2 317.7

DPS 12.5 15.0 40.0 45.0 50.0

Valuations (x) FY19 FY20E FY21E FY22E FY23E

PER 69.1 58.0 48.4 42.2 37.1

P/CEPS 60.6 51.2 43.2 38.0 33.5

P/BV 18.8 15.4 13.6 11.9 10.5

EV / Sales 7.2 6.8 6.1 5.4 4.8

EV / EBITDA 45.6 42.4 35.1 30.8 27.0

Dividend Yield (%) 0.4 0.5 1.2 1.4 1.5

Gearing Ratio (x) FY19 FY20E FY21E FY22E FY23E

Net Debt/ Equity (0.2) (0.3) (0.3) (0.3) (0.4)

Net Debt/EBIDTA (0.4) (0.7) (0.8) (0.9) (1.0)

Working Cap Cycle (days) 35.5 34.5 35.1 34.8 34.5

Growth (%) FY19 FY20E FY21E FY22E FY23E

Revenue 11.5 4.6 12.2 11.2 11.0

EBITDA 15.4 6.7 20.1 13.4 12.9

EBIT 15.6 6.0 21.4 14.0 13.2

PAT 15.1 19.0 19.9 14.6 13.7

Quarterly (Rs mn) Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20

Revenue 28,424 27,990 27,003 30,488 29,827

EBITDA 4,518 4,366 3,947 4,922 5,020

EBITDA Margin (%) 15.9 15.6 14.6 16.1 16.8

PAT 3,001 2,943 2,488 4,027 3,699

EPS (Rs) 12.5 12.2 10.4 16.8 15.4


Shareholding Pattern (%) Mar-19 Jun-19 Sep-19 Dec-19 Mar-20

Promoters 50.7 50.7 50.7 50.6 50.6

FIIs 15.8 15.7 15.2 15.8 14.7

DIIs 12.4 13.1 13.6 13.6 13.4

Public and Others 21.2 20.5 20.6 20.0 21.3

Source: Capitaline




May 28, 2020| 10

RECOMMENDATION HISTORY TABLE

Date Closing

Price TP

Period (months)

Rating Analyst

14-Apr-20 2,706 3,250 12m Buy Ashit Desai

08-Apr-20 2,776 3,250 12m Buy Ashit Desai

03-Mar-20 3,027 3,500 12m Buy Ashit Desai

10-Feb-20 3,156 3,500 12m Buy Ashit Desai

25-Dec-19 3,091 3,500 12m Buy Ashit Desai

13-Nov-19 3,270 3,500 12m Buy Ashit Desai

20-Sep-19 2,867 3,300 12m Buy Ashit Desai

02-May-19 2,783 3,000 12m Hold Ashit Desai

09-Apr-19 2,963 3,050 12m Hold Ashit Desai

11-Feb-19 3,108 3,050 12m Hold Ashit Desai

31-Dec-18 3,115 2,950 12m Hold Ashit Desai

13-Nov-18 2,906 2,950 12m Hold Ashit Desai

06-Aug-18 3,163 3,050 12m Hold Ashit Desai

16-May-18 2,771 2,925 12m Accumulate Ashit Desai

15-Nov-17 2,375 2,502 12m Accumulate Amit Purohit

09-Aug-17 2,029 2,138 12m Accumulate Amit Purohit

30-May-17 1,713 1,650 12m Hold Amit Purohit


RECOMMENDATION HISTORY CHART

Source: Bloomberg, Company, Emkay Research

1650

2020

2390

2760

3130

3500

30

-Ma

y-1

7

28

-No

v-1

7

29

-Ma

y-1

8

27

-No

v-1

8

28

-Ma

y-1

9

26

-No

v-1

9

26

-Ma

y-2

0

BUY Hold SellAccumulate Reduce PriceTarget Price




May 28, 2020| 11

Emkay Alpha Portfolio – Consumer Goods & Retail

EAP sector portfolio

Company Name BSE200 Weight

EAP Weight

OW/UW (%)

OW/UW (bps)

EAP Weight (Normalised)

Consumer Goods & Retail 14.10 14.10 0% 0 100.00

Asian Paints 1.47 0.66 -55% -81 4.68

Berger Paints 0.22 0.00 -100% -22 0.00

Britannia Industries 0.76 1.34 76% 58 9.50

Colgate-Palmolive 0.34 0.49 42% 15 3.47

Dabur India 0.49 0.53 9% 4 3.75

Emami 0.08 0.00 -100% -8 0.00

Godrej Consumer Products 0.44 0.00 -100% -44 0.00

Hindustan Unilever 3.59 3.07 -15% -53 21.75

ITC 3.30 3.72 13% 42 26.39

Marico 0.34 0.32 -4% -2 2.28

Nestle India 1.20 0.96 -20% -24 6.83

Pidilite Industries 0.43 0.00 -100% -43 0.00

Radico Khaitan 0.00 0.31 NA 31 2.17

United Breweries 0.13 0.71 450% 58 5.04

United Spirits 0.00 0.47 NA 47 3.33

ABFRL 0.07 0.28 303% 21 1.97

Jubilant FoodWorks 0.26 0.28 10% 3 2.00

Page Industries 0.22 0.00 -100% -22 0.00

Shoppers Stop 0.00 0.00 NA 0 0.00

Titan Company 0.75 0.97 29% 22 6.85

Cash 0.00 0.00 NA 0 0.00

Source: Emkay Research

* Not under coverage: Equal Weight

High Conviction/Strong Over Weight High Conviction/Strong Under Weight

Sector portfolio NAV

Base Latest

1-Apr-19 26-Aug-19 27-Nov-19 25-Feb-20 27-Apr-20 27-May-20

EAP - Consumer Goods & Retail 100.0 97.3 108.2 109.5 100.3 97.1

BSE200 Neutral Weighted Portfolio (ETF) 100.0 94.1 102.4 103.6 96.9 91.9

*Performance measurement base date 1st April 2019


NAV chart


Please see our model portfolio (Emkay Alpha Portfolio): SMID

Please see our model portfolio (Emkay Alpha Portfolio): Nifty

“Emkay Alpha Portfolio – SMID and Nifty are a supporting document to the Emkay Alpha

Portfolios Report and is updated on regular intervals”

75

83

91

99

107

115

Apr-19 May-19 Jul-19 Sep-19 Oct-19 Dec-19 Feb-20 Mar-20 May-20

NAV

EAP - Consumer Goods & Retail BSE200 Neutral Weighted Portfolio (ETF)

Analyst: Ashit Desai

Contact Details

[email protected]

+91 22 6612 1340

Sector

Consumer Goods & Retail

Analyst bio

Ashit Desai holds a PGDM and FRM (US

GARP) with 12 years of research

experience on the sell side. His team

currently covers 24 stocks in the Indian

Consumer and Retail space.


https://web3.emkayglobal.com/ResearchAccess/Upload/SMID_May20.pdf

https://web3.emkayglobal.com/ResearchAccess/Upload/Nifty_May20.pdf

mailto:[email protected]



May 28, 2020| 12

Emkay Rating Distribution

Ratings Expected Return within the next 12-18 months.

BUY Over 15%

HOLD Between -5% to 15%

SELL Below -5%

Completed Date: 29 May 2020 12:07:09 (SGT) Dissemination Date: 29 May 2020 12:08:09 (SGT)

Sources for all charts and tables are Emkay Research unless otherwise specified.

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May 28, 2020| 13

ANALYST CERTIFICATION BY EMKAY GLOBAL FINANCIAL SERVICES LIMITED (EGFSL) The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible of the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer, director or employee of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant). The research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. EGFSL has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the EGFSL and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of EGFSL compensation to any specific investment banking function of the EGFSL. 1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interest that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at the arm’s length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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May 28, 2020| 14

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