Covid winner! This biscuit maker beat the blues & sailed to a 52-week high

Mumbai: While Covid-19 has clouded the outlook for the market at large, this biscuit maker is trading at 52-week high as it rode the wave of low-ticket consumption demand as emerged winner from the disruption.

The stock is Britannia Industries.

On the bourses, the stock has been a consistent multi-bagger and has returned nearly 2,000 per cent over the past decade, 90 per cent in last three years and 17 per cent in last one. It traded at Rs 3,451 on Tuesday in an upbeat market.


The stock currently has 12 ‘strong buy’, 9 ‘buy’, 9 ‘hold’ and 5 ‘sell’ ratings, data from Reuters Eikon showed.

Biscuits are India’s largest consumer product segment. The market for biscuits and cookies in India has come a long way, accounting for about 72 per cent of sales in the bakery industry, showed an April report on Indianretailer.com.

In the midst of coronavirus-induced lockdown, items such as biscuits and noodles disappeared fast from the shelves due to stocking and also increased consumption, which was partially boosted by a switch from street food to packaged and home-cooked food.

On May 27, Philip Capital raised its rating on the stock to ‘buy’ from ‘neutral’ with a price target of Rs 3,550.

“We expect Britannia to deliver superior performance (14 per cent EPS growth CAGR over FY19-22) vs. FMCG peers due to its higher earnings resilience (as biscuits is a low-ticket segment with characteristics of essential products) and lower share (around 5 per cent of revenue) coming from international operations,” Philip Capital said in a note.


“Moreover, any decision taken by the board of directors to eradicate lingering corporate governance concerns (ICD etc.) could lead to a further re-rating of valuation multiples,” he said.

On May 29, Emkay Global re-iterated its ‘buy’ rating on the stock, increased Britannia’s earnings estimates by 12 per cent and raises the price target to Rs 3,900 from Rs 3,250. This factored in stronger-than-expected growth trends in its portfolio, besides an acceleration in market share gains and multiple tailwinds for higher growth and margin expansion.

“Britannia is emerging as the biggest beneficiary from the disruption, as packaged foods consumption is growing strongly, led by higher home consumption and lesser avenues for out-of-home eating,” the brokerage said.

“The shift from unorganised/street food to packaged foods may sustain even post lockdown given the higher preference for hygiene and trusted brands,” it added.

Siddhartha Khemka of Motilal Oswal Securities said valuations of some of the stocks in the consumption space have corrected from the previous highs and still continue to remain high on an absolute basis

“But this sector gives some comfort that growth will come back as soon as the relaxation comes in and people go back to the normal routine. Hence it is a sector that investors should definitely look at in the current environment,” he said.