>BRITANNIA INDUSTRIES LIMITED: Q3FY12 – Sales growth driven by price and mix growth, Volume growth in single digit at 6.5%

• Britannia reported net sales at Rs12.4 bn, up 15.4% Y-o-Y led by mix volume and price/mix
growth.
• Gross margin expanded by 304bps Y-o-Y to 36.7%.
• EBIDTA stood at Rs833 mn, 43% up Y-o-Y. EBITDA margins expanded 130bps Y-o-Y to 6.7%.
• Other expenditure and ad spends increased by 25% Y-o-Y (up 164bps) and 14% Y-o-Y (up 12bps)
in Q3FY12.
• PAT grew 45% Y-o-Y to Rs541 mn. PAT margins expanded 88bps Y-o-Y to 4.3%.


Result Highlights
■ Performance boosted by international business, while domestic business grew by strong 20%
Britannia reported net sales at Rs12.4 bn, up 15.4% Y-o-Y as against 18% Y-o-Y growth in Q2FY12. Volume growth contributed 6.5% (10% in Q2FY12) of Y-o-Y sales growth, while rest was due to price increases and improved product mix. The new product launches on health platform like NutriChoice Multigrain Thins and NutriChoice Multigrain Roasty has helped to push up the momentum.


■ Margins expansion led by price increases and lower expenses
Gross margin expanded by 304bps Y-o-Y to 36.7% helped by price increases. Among key raw
materials, milk prices continue to remain high; wheat and sugar prices witnessed stable prices.
While ad spends increased 17% on Y-o-Y basis, it decreased 13% on Q-o-Q basis as a result of high base. Other expenditure increased by 25.5% (up 164bps) Y-o-Y and staff cost increased 14% Y-o-Y (Q-o-Q 30% down). As a result EBIDTA stood at Rs 833mn, 43% up Y-o-Y. EBITDA margins expanded 130bps Y-o-Y to 6.7%. Further PAT grew 45% Y-o-Y to Rs541 mn. PAT margins expanded 88bps Y-o-Y to 4.3%.


Valuation & Viewpoint
Current quarter witnessed single digit volume growth. Further competition from national players
like Parle and ITC along with recently entered United Biscuits, Unibic and Kraft Foods has further intensified. We have a cautious view on the company. The stock is trading at 25.6x multiple of FY13 consensus EPS of Rs. 19.3.

RISH TRADER