Shares of Britannia Industries rose 2.39 percent on Wednesday to hit a new all-time high of ₹4,387.90 apiece, a day after the company announced that it has entered into a joint venture with French company Bel SA and Britannia Dairy (BDPL) for the development, manufacturing, marketing, distribution, trading, and selling of cheese products in India and certain other countries.
As per the terms of the agreement, Britannia will transfer a 49 percent stake in its wholly-owned subsidiary BDPL to Bel SA in a share purchase agreement for a consideration of ₹262 crore.
"BDPL will become a Joint Venture Company (‘JV Company’) of Britannia and Bel in India which will carry out/undertake the cheese business in the Territory. Further, as a part of the JVA, BDPL will allot equity shares to Britannia and Bel, in accordance with the terms of the Share Subscription Agreement entered between Britannia, Bel and BDPL, on 29th November 2022," said the company.
Since mid June, the stock has grown from ₹3,332 to the current levels, representing a return of nearly 30.91 percent. The stock also ranks among the top gainers in the Nifty FMCG index with a return of 23.6 percent in the past one year.
The stock closed at ₹4,362 on Wednesday, having risen 43.01 percent from its 52-week low of ₹3,050.
Motilal Oswal says that the JV will enable the company's dairy business to scale up faster than it has in the past. The brokerage said the dairy business constituted a small part of overall sales for the company ( ₹3.4 billion, or 2.4% of total sales in FY22), and the JV provides additional funding to Britannia's erstwhile 100 percent owned dairy business and a host of global brands and domain knowledge from Bel’s portfolio.
Earlier in October, Britannia and Associates (Dubai) Pvt. Ltd. (BADCO), a wholly-owned subsidiary of Britannia, acquired a 51 percent equity stake in Kenafric Biscuits Ltd. (KBL). Besides, it also acquired Catalyst Britania Brands Ltd., an investment company that owns the "Britania" trademark in Kenya.
The company has a presence in the Middle East through local manufacturing in the UAE and Oman. It is also in the process of investing in a manufacturing facility in Nepal, where it is a market leader, PTI reported.
Britannia reported its highest quarterly revenue of ₹4,338 crore in Q2, up 22 percent YoY, primarily led by a cumulative price growth of 18 percent and volume growth of 5 percent. The management states that the company’s market share gains are driven by its strong distribution expansion in direct channels, which, coupled with rural distribution, contributed to the growth.
The company posted a 28.31 percent YoY jump in its consolidated net profit to ₹493 crore for the September quarter compared to ₹384.2 crore in the year-ago quarter. Total expenses came in at ₹3,773.7 crore in Q2 FY23, up 20.25 percent from ₹3,138.1 crore in Q2 FY22.
Following the strong quarter's results, analysts anticipate that the company would continue to grow in the upcoming quarters.
In its results update report, Axis Securities stated that the company's most difficult days are behind it. This is because raw material prices have stabilised and a normal monsoon is expected to cause a rural revival.
In addition, it says the company's long-term prospects remain strong as the management has a proven execution track record, robust portfolio planning through NPD in core and adjacencies, and a focus on continued distribution expansion in direct as well as rural markets.
The brokerage has updated its rating from "HOLD" to "BUY" with a revised target price of ₹4,550 per share from an earlier price of ₹3,950.
Geojit Financial Services states this is the company's 38th consecutive quarter of market share gains. It said that despite price hikes to combat inflation, Britannia has improved margins beyond pre-Covid levels.
Geojit has reiterated its "BUY" rating on the stock with a revised target price of Rs. 4,670 based on 52x FY24E adjusted EPS.
36 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.