Valuations do not warrant fresh buying in Britannia; existing investors should stay put: Mayuresh Joshi

In a chat with ET Now, Mayuresh Joshi, Fund Manager, Angel Broking, shares his top investment ideas.

ET Now: You are positive on Britannia Industries and, in the past, you have liked the stock at Rs 3,100 level. Is Britannia price to perfection?

Mayuresh Joshi: Britannia Industries' valuations are close to 36-odd times FY17 earnings. We believe that it should continue to remain a part of portfolio on few counts. The return on capital (ROC) has showed tremendous improvement from lower levels to around 54 per cent.

The return on equity (ROE) too is at a very decent level at 50 per cent-odd. If you look at the cash convergence cycle, the company is sitting on decent cash at the current juncture. In addition, the cost optimisation efforts that the company is probably taking to margin expansion, I am not of the opinion that the margins would stay at 14-14.5 per cent.

The numbers have been aided by too many factors in the June quarter results. So, low raw material, freight and fuel costs have probably propped up margins. But decent margin expansion has to happen with the cost optimisation plan and premiumisation story — the cookie market — that will still play out. So, in my opinion, investors who have bought the stock at lower levels should continue holding on to it for 10 years though valuations at the current juncture do not warrant a fresh buy at the current level.