“Nearly 80 per cent of Britannia’s turnover comes from biscuits, which is an essential category, is less impacted during the nationwide lockdown. We note that during lockdown period consumers have resorted to up-stocking of essential items including packaged foods like biscuits,” says an analyst tracking the company at Axis Securities. Today the company has an overall distribution reach of above 5.5 mn outlets. Out of these it reaches directly to 21.7 lakh retail outlets and approximately 21,000 dealers as on Q3 FY2020.
On the financial front, the company’s sales and Profit After Tax (PAT) clocked a Compounded Annual Growth Rate (CAGR) of 6.42 per cent and 9 per cent over FY2016-19. For the Q3 FY2020, the company’s revenue rose 4 per cent at `2,936 crore, whereas net profit was up by 24 per cent at `373 crore.
“The company, in last five years, has seen its operating cash flow grown at 12 per cent CAGR and Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) margin has almost doubled to 15.7 per cent. Have negligible debt with debt/equity of 0.04x and has good cash position of `850 crore as on FY2019,” says an analyst at Geojit Financial Service
Post lifting of the lockdown, market experts believe, the company can witness opportunities to gain market share led by the distribution expansion in Hindi belt, premiumisation of products as well as share gains from regional/local players who may witness the dent in their business due to COVID-19. “Its strong in-market execution capabilities and focus on driving premiumisation (though it has been pushed by another 1-2 quarters owing to coronavirus pandemic) are key growth drivers from a long-term perspective,” says an analyst at Axis Securities. The recent stock underperformance and improving margin outlook provide a good entry opportunity for an investor’s view and many brokerages, who remain upbeat on the prospect of the company. “Despite the continued struggle to grow revenues in FY20, market share gains were unprecedented. It reflects the company’s strong execution capabilities in this challenging phase. Although new product launches will be slow in the near term, we believe company will bounce back in 2HFY21,” says an analyst at HDFC Securities.
