1. Company & Business Strength: 9/10
Britannia Industries Limited is an Indian company specializing in the food industry, part of the Wadia Group. Founded in 1892 and headquartered in Kolkata, it is one of India's oldest existing companies and is best known for its biscuit products. The company sells its Britannia and Tiger brands of biscuits, bread, and diary products throughout India and abroad. It still has a large market share and it is profitable.
Biscuits:
The company's factories have an annual capacity of 433,000 tonnes. The brand names of Britannia's biscuits include VitaMarieGold, Tiger, Good day, Nutrichoice, 50-50, Treat, Pure Magic, Milk Bikis, Bourbon, Nice Tim, Little Hearts, and others like Bread and Rusks.
Dairy Products:
Dairy products contribute close to 10% to Britannia's revenue. The company not only markets dairy products to the public but also trades diary commodities business-to-business. It is also involved in making Milk Shakes like Badam, chocolates, and others.
2. Competitive Strength: 9/10
Although Britannia is an FMCG company, which has other giants like HUL(Unilever), Nestle, Dabur, Marico, ITC, Mrs. Bector's food, Jubilant Food works & others.
But due to being into mostly food & beverages, the core competitor is mostly Nestle, ITC, Mrs. Bector food, and Parle (unlisted). Since ITC and nestle are involved in other products like baby products and cigarettes, noodles mostly they still can be ruled out here.
Mrs. Bector's food is still very small compared to Britannia, so except for Parle which is unlisted in the market, Britannia still enjoys a monopoly and captures a high market share in Biscuits and is a stable Large cap company.
3. Stock Analysis Return & PE Ratio: 5/10
Britannia Stock is listed both in NSE, and BSE and currently trading around 3600 (Jan 2022), with 52 highs of 4150s and lows of 3300s.
It has a market cap of 86000+ which is a Large cap, Stock has been consolidating for a long time now between 3500 to 4000 for almost 3 years, and since both profit and Sales are still growing there is not much downside left here.
The stock has given a 3-year CAGR of 4.8% which is poor.
The face value is 1, so there is no split to be given any more, except bonuses and buybacks.
PE Ratio: Britannia has s PE of 53.78 which is fair compared to sector PE. Due to high valuation in 2018-2020 (of PE 70+) the stock has been just flat for 3 years.
4. Dividend: 10/10
The stock has been giving exceptional dividends of 4.71% which is way more than any other company. Generally, we expect a growing company to give atleast a 1% dividend which is a good gesture and sign unless high Capex is planned.
Financial Ratios:
5. Sales Growth/Revenue: 6/10
The Sales growth indicates that the company can capture the market, and which may increase profitability.
Britannia has a 3-year median Sales growth of 9.99% which is fair. Current year (2021) growth stands at 12.67%. For large caps, we consider the growth of atleast 10%+ as healthy sales.
6. Profit Growth: 9/10
Sales growth indicates a good income, but unless profit is not made it's terrible. Profit growth indicates how expenses are managed or also how the company has pushed the raw material prices to end customers.
Britannia's Profit growth stands at a 3-year median of 22.91% which is exceptional, Current year stands at 18.58%. For a large cap, atleast 15%+ is considered healthy growth in Profitability.
7. [ROE] & [ROCE] %: 10/10
Return on Equity:
ROE indicates the ability to generate profits from shareholders/Equity Investments. Britannia ROE has a 3-year median of 37.89%. The current year stands at 46.74%.
We consider a healthy ROE to be atleast 20% for growth companies.
Return on Capital Employed:
ROCE indicates the ability to use its capital employed for business. Britannia ROE has a 3-year median of 45.13%. The current year stands at 46.76%.
We consider a healthy ROCE to be atleast 20% for growth companies.
8. Debt/Equity: 6/10
D/E is a measure of which a company is running through debts vs owned funds. Ideally, D/E should be less than 1, which indicates stability.
Britannia has a D/E of 0.55 which is still not a good sign. Unless capital expansion or any other is required, a low debt is always good to maintain profitability.
We consider debt-free or D/E<0.1 to be healthy.
Note: The debt has recently increased in the last 3 years.
9. Shareholding %: 10/10
The company has a high Promotor holding of 50.55%. The FII and DII of 17.65% and 11.53% indicate it is in strong hands. The remaining are for the Public.
Note: The Promoter Pledging % is 0% which is good, generally no pledging indicates a good sign.
Another indicator like interest coverage ratio, Return on Assets[ROA], and others also seems good.
10. Future Prospects: 7/10
Pros:
The Financial ratios have been very good in most aspects except D/E. The stock has given less return for the last 3 years but that may be due to trading at a high P/EThe exceptional
Exceptional dividend is given by the company.
Looking at all aspects we expect Britannia to be in the right direction and maintain healthy growth.
Cons:
The Debt is a bit high which is a concern for the future.
Better Sales growth is expected for high-growth companies.
Raw material Inflation is always a risk for the company.
Investment Hacks Score Card:
The average score of Britannia based on all factors comes to be 8.1/10.
Conclusion:
Britannia has enjoyed a good market share in the Food industry, with a highly profitable company. The stock has given multifold returns to shareholders from listing. Since this is a large cap with great fundamentals Investors can see the limited downside and consider it a stable investment.
Disclaimer:
Since this is an educational opinion, Please research thoroughly or consult your financial advisor before Investment.
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Team Investment Hacks
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