Britannia Complete Fundamental Analysis and Future Outlook
Britannia Industries was established in 1892 by a group of British businessmen with an initial investment of INR 295. It is one of India’s oldest existing companies and now a part of the Wadia Group headed by Nusli Wadia. Britannia is one of the most trusted food company in India and operates some well know brands like Good Day, Tiger, NutriChoice, Milk Bikis and Marie Gold. The company was also recently included in the Nifty-50 benchmark index.
- Britannia is on a journey to become the №1 Total Foods Company in India. Hence they have recently diversified into Snacks which is INR 25,000 category growing at 20% per annum and Milkshakes which is INR 2,800 category growing at 27% per annum.
- Britannia has also launched new products including Croissants, Cream Wafers and Baked salted snacks. The company’s focus is on expanding its markets along with improving cost efficiency and their expansion plan is based on the principle of ‘One new market a year’.
- The company’s Dairy business contributes close to 6% of the total revenue and has a direct reach to 100,000+ outlets in India. Britannia Bread is the largest brand in the organized bread market with an annual consumption of over 1+ lakh tonnes in volume and INR 500+ crores in value.
- Mr Nusli N Wadia is the Chairman of the company and represents the promoter’s interest.
- Mr Varun Berry is the Managing Director and has an experience of over 27+ years with companies like Hindustan Unilever and Pepsico. Beginning with the circumstances of its takeover by the Wadia group in the early 1990s, the company has been mired in several controversies connected to its management. However, it enjoys a large market share and is exceedingly profitable, which helps the company to keep its Investors gratified.
I have evaluated the company on 10 fundamental categories and each has been given a rating out of 5 stars. From this, I have arrived at a combined stock rating for the company.
This is the summary of the analysis. You can read the detailed analysis with the excel models on my blog (Check the source link)
Source: Britannia Fundamental Analysis and Future Outlook
Some insights for the coming years from the analysis, management discussions and con calls are as follows.
- The effect of COVID-19 outbreak and the lockdown will be only of revenue loss due to production shutdowns and disrupted supply chains. Since the lockdown, Britannia’s factories are running at 25–30% capacity. Major concerns are demand, distribution and labour crunch for the company in the near future. However, recovery can be seen before the end of FY 2020.
- Down-trading can be expected in the low margin products in the coming years especially in the rural region. (Down-trading is reducing the number of features or the quantity of a product to suit the selling price demanded by its customers)
- The company is expanding distribution month-after-month. Direct reach is now to 2.2 million outlets and total reach is to 5.5 million outlets. The management is trying to increase it to 6 million in the coming 2 years. Parle’s distribution is at 6.3 million outlets in terms of the total reach but only half of Britannia’s in terms of direct reach.
- Britannia is planning to take selective price increases to offset the likely impact of raw material cost inflation. Price hikes will be taken mostly in premium brands, which haven’t seen a price hike in the last 24 months.
The company has solid fundamentals and a good track record of profitability. The only concern is the promoter’s family and management which has time and again involved in controversies. But overall the company still remains a good investment considering its future growth prospects.
Subscribe to my Blog: Subscribe — Billion Dollar Valuation
Join my Telegram Channel
