Britannia Industries is one of India’s leading food companies with a 100 year legacy and annual revenues in excess of Rs. 9000 Cr. Britannia is among the most trusted food brands, and manufactures products under brands like Good Day, Tiger, NutriChoice, Milk Bikis and Marie Gold. Britannia’s product portfolio includes Biscuits, Bread, Cakes, Rusk, and Dairy products including Cheese, Beverages, Milk and Yoghurt. Britannia products are available across the country in close to 5 million retail outlets and reach over 50% of Indian homes. Britannia Bread is the largest brand in the organized bread market with an annual turnover of over 1 lac tons in volume and Rs.450 crores. Also, it is true that Britannia is a brand which many generations of Indians have grown up with and their brands are cherished and loved in India and the world over.
The same kind of love is with its shares also where we have not seen any big fall in last few months despite of Weak Market. Because of good Quality management which is running business smoothly, Britannia has been able to gather enough interest of investors to become among the top Food Manufacturing company of India. Shares of Britannia are also trading at a lifetime high all because of its quality management, quality products, and quality of business.
From last few months, most of the stocks where there are few concerns over management quality have taken a dip/big hit which has forced them to make new 52 week low. Many stocks like HCC, Vakrangee, Suzlon, PC Jeweller, HDIL, PNB, Adani Power, Adani Enterprises, Manpasand Beverages, Jetairways, Tata Motors, CG Power and lot more have proved to be the money wasting stocks for last few months. But stocks like Bajaj Finance and Bajaj Finserv, Jubilant Foodworks, Page Industries, TCS, etc have generated that kind of return after which it wouldn’t be right to say that Largecap cannot generate enough return as Midcaps and Smallcap can generate. Britannia is also among the same category of stocks where quality has helped to achieve more value.
At current levels, the market cap of company stood around Rs 73,000 crore which is really very big one. As per last Financial year data, latest PE ratio of company is around 72. Also, Book value of company is around Rs 308 which means Price to Book ratio is 20.
However, in current market scenario, I don’t think that we need to do a lot of research on its fundamentals because the conclusion would be that it is a good quality company and is trading at slightly expensive valuations. But who cares now for valuations when the list of rising stocks or DIIs/FIIs favourite stocks has reduced to just 20–50!
Whether the valuations of Britannia goes up to Rs 6400 or 6500, it would still be a attractive pick because double digit growth is there in company and FIIs/DIIs have now very limited options to play for next few months. Therefore, I think for atleast 2018, there would be no risk in stock associated with its Fundamentals or valuations.
However, because quality stocks are rising at this good speed only because the broader market is still waiting for FIIs/DIIs to start picking stocks, there is a little risk associated with most of the expensive stocks. The risk is that if, for some reasons, FIIs and DIIs starts investing in Broader market means in those stocks where potential is there whether it has quality or not, then the current buying which we are seeing in Quality stocks may stop. Maybe, stoppage of buying from Bigger hands may also lead to profit booking by small investors in such Quality stocks which may then lead to decline in share price of Britannia.
So overall, I think for 2018, it could be a good option to invest majority of your money in Good Quality stocks like Britannia. But if you have a short-term view like for next few months only, then it is necessary for you to keep an eye on broader market also and cheak whether the Buying interest is not getting change to Potential or Value Buy stocks again. However, if you have a long-term view like 3–5 years, then yes you can invest in Britannia at current levels without any tension. I think for next 3–5 years, stock may give you a annual return of between 15–20 percent.
Have any question related to this post? Feel free to ask through comment box given below.