Britannia Industries Ltd.'s Ranjangaon plant in Maharashtra is a "source of competitive edge and cost leadership", Nomura Holdings Inc. said after its visit to the plant.
It was the "most advanced and automated plant" with 146 acres of area and catering to 10–12% of Britannia's volume, the brokerage said in a note on Monday.
Nomura maintained a 'buy' rating on the stock given the strong pipeline of new launches, scale-up in dairy capacity after the joint venture with processed cheese brand Laughing Cow, expansion in rural markets, and margin improvement.
The scrip has beaten all its peers to register 15-fold growth in the last 10 years. It was the top gainer on the Nifty FMCG index in the same period. Shares of Britannia Industries hit a new lifetime high of Rs 5,064.40 apiece on Monday. The stock crossed the Rs 5,000-per-share mark after hitting at least four record highs in June.
Nomura On Britannia Industries
Maintains a 'buy' rating with a price target of Rs 5,425 apiece.
Product volumes have increased despite sharp price hikes.
Prudence in raw-material procurement aided margin improvement and expansion into rural markets.
Expect strong product development pipeline with strong traction in new launches like JimJam Pops, new variety of milkshakes, croissants and entry into new categories such as juices.
Joint venture with The Laughing Cow will ramp-up its cheese portfolio.
Large integrated plant at Ranjangaon has competitive advantages like new imported machines, improved in-sourcing, cost savings in distribution, energy, freight and improved ability to launch new products.
Ranjangaon plant has aided in reducing the distance travelled by biscuits, leading to the lower freight costs.
Shares of Britannia Industries were up 0.43% at Rs 5,042.45 as of 1.58 pm, compared to a 0.02% decline in the NSE Nifty 50. It rose as much as 0.48% intra-day.
The relative strength index was at 79, implying that the stock may be overbought.
Out of the 42 analysts tracking the company, 31 maintain a 'buy' rating, nine recommend a 'hold' and two suggest 'sell', according to Bloomberg data. The average 12-month consensus price target implies a potential upside of 1.9%.
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