Way2Wealth Securities has recommended 'Hold' on Britannia Industries with current market price (CMP) of Rs 1,672.7 in its report.

The company recently released its Q2FY15 results. The results are a testimony of the management's three pronged strategy for growth-extension of power brands to grow its mainstay biscuit segment, dairy to grow on the back of valued added propositions & lastly bakery growth to be backed by more nutritional offerings.

Commenting on the investment rationale, the broking firm said, "On the macro basis we like the food space for the above stated reasons. Britannia which was in a mode of is filling its tank before it can accelerate all three cylinders to drive growth has shown results this quarter.

We expect the company to continue to focus on its core categories of biscuit, bread & dairy and not diversify into other segments. Dairy segment to continue to see a slew of launches as demand increase for out-of-home dietary dairy products in urban India. The company targets to increase its dairy business from Rs 3 billion  to Rs 20 billion over the next 4 to 5 years.

Premiumisation of the product portfolio and decentralized manufacturing facilities to help consolidate regional distribution costs and hence control overall logistics cost. The new managements’ motto is to lay emphasis on distribution growth and cost containment to bring about profitable growth.

We believe its brand leverage coupled with strong distribution network and entry into growing and profitable segments will boost growth in the next 2-3 years. At the CMP of Rs 1672.7 the stock trades at 34.7x & 31.5x its FY15E & FY16E estimated EPS of Rs 49.1 and Rs 52.6 respectively.

We believe the managements cost saving initiatives still provides scope for bettering of margins going forward. We believe FY15 will see a slew of innovation led new launches post consolidation of operations. We recommend investors to Hold the stock.''

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