Britannia Industries Limited: Intrinsic Value Projection for March 2009
The following report will give you what can be the probable intrinsic value based on simple projected PAT which is arrived as percentage of projected sales for Mar 2009 for BIL.
Calculation of projections for 2009
- The sales growth for the past three years is found and average is taken into consideration for projecting sales for 2009
- Then operating profit margin as percentage of sales is taken for the last three years and the average is taken into consideration for projecting operating profit for 2009
- Then PAT as percentage of operating profit is calculated and then the average is used to project the PAT for 2009
- The details are shown below in the table
| Margins | Mar ’06 | Mar ’07 | Mar ’08 | Average |
| Operating Profit as percentage of sales | 0.117317 | 0.05855 | 0.089678 | 0.088515 |
| PAT margin as percentage of Operating profit | 0.728435 | 0.836763 | 0.824159 | 0.796452 |
Calculation of P/E max and minimum for every year
- For every financial year the max price and minimum price is taken in the span say mar 2005 to mar 2006 then P/E is calculated
- Similarly for all the years it is done and P/E max and minimum is calculated
- The prices are as follows and it is taken from NIFTY data
| Year | Max price | Min price |
| 2006 | 1805 | 1040 |
| 2007 | 1950 | 1025 |
| 2008 | 1773 | 1190 |
Projected Sales /Operating Profit/PAT based on average margins
| Parameters | Mar ’06 | Mar ’07 | Mar ’08 | Projected Mar ’09 |
| Net Sales Turnover | 1,713.30 | 2,199.30 | 2,584.80 | 3176.7192 |
| Cost of Goods sold | 1512.3 | 2070.53 | 2353 | |
| Operating profit | 201.00 | 128.77 | 231.80 | 279.5512896 |
| Other Income | 21.7 | 31.4 | 50.2 | |
| Total Extraordinary Income/Expenses | 4.8 | -7.6 | -10.9 | |
| PBDIT | 227.50 | 152.57 | 271.10 | |
| Depreciation | 21.72 | 25.27 | 29.08 | |
| PBIT | 205.78 | 127.30 | 242.02 | |
| Interest expenditure | 5.08 | 8.8 | 9.73 | |
| PBT | 200.70 | 118.50 | 232.29 | |
| Current Income tax | 52.08 | 8.43 | 35.60 | |
| FBT | 2.33 | 5.13 | 6.66 | |
| Wealth Tax | 0.058 | 0.12 | 0.12 | |
| Deffered tax | -0.1834 | -2.93 | -1.13 | |
| Profit after taxation | 146.42 | 107.75 | 191.04 | 222.5228265 |
| Profit brought forward | 50.00 | 50 | 60 | |
| Profit for appropriation | 196.42 | 157.75 | 251.04 | |
| Dividend | 35.84 | 35.84 | 43 | |
| Earnings Per Share | 61.286899 | 45.102246 | 79.966 | 93.14412234 |
| P/E MAX | 29.4516453 | 43.2350978 | 22.17193 | |
| P/E MIN | 16.969369 | 23.7075907 | 14.88133 |
Calculation of average P/E
The average of all the P/E is calculated both maximum and the minimum for the last three years and it is listed below.
| Average P/E max | 31.61955836 |
| Average P/E min | 18.51943009 |
Calculation of Intrinsic value
- The intrinsic value is calculated by multiplying the P/E Average with the EPS we projected for 2009
- It will have two values as shown below and it is the price range
- Hence to narrow down an average is taken and it is shown below
| INTRINSIC VALUE MAX | 2945.172144 |
| INTRINSIC VALUE MIN | 1724.973796 |
| AVERAGE | 2335.07297 |
Analysis
Based on the intrinsic value I have got and the prevailing market price of Rs 1444 (8/9/2008) I would suggest a Buy Decision for this script as this is likely to go up to Rs 2335 in March 2009.
Disclaimer: However as I always say we don’t take responsibility of any value arrived out of our projection since it depends on method we choose and there are so many other extraneous variables which affect the value which we didn’t capture in this projection.
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