Brittania Industries Limited Price Range till August 2009
The following report will give you what is the price range for Brittania Industries Limited till August 2009. It is however based on simple average returns calculated from last three year traded prices.
The P/E range which is also a good indicator for any investor is also projected at the end.
METHOD 1
Calculation of P/E Range
The market price of Britannia industries limited till date (14th august is taken) from the last three years and average return on year on year basis with average price is calculated. First general average is calculated for return (This doesn’t nullify abnormalities).
Average annual return including abnormalities = 5.52%
To nullify abnormalities a moving average on returns is calculated and average of averages is calculated.
Average annual return excluding abnormalities (Moving average) = 13.97%
Based on this the projected two price ranges are calculated which is
At 5.52 % it is 1455.18 (Last average price on 14th August 2008 * Return)
At 13.97 % it is 1571 (Last average price on 14th August 2008 * Return)
Calculation of Projected EPS
The average return of last three years is taken which is 20.2 % which includes abnormalities like negative growth. Then negative growth is completely removed and average growth is calculated and it is 54%.
To nullify this average of both the values is taken which is 37.32 % as EPS growth. Based on this EPS is projected for the next year which is found to be 109.8. With this if price normalized and EPS normalized P/E is found to be 14.31.
Normalized price/normalized EPS= 14.31
Non-Normalized price/non-normalized EPS= 15.16
METHOD 2
Calculation of P/E Range
In this method the average of 10 maximum prices is taken and this is divided by projected normalized EPS to find the upper range.
=1800/109
P/E (Upper) =16.39
The minimum is also calculated by taking the average of last ten minimum prices in the last three years and then dividing this by EPS normalized.
=1200/109
P/E (Lower) =11
So my conclusion would be a P /E range of 11 to 16 for the next year.
METHOD 3
In this method the sales is forecasted by taking the average growth and also cost of goods sold and all parameters by taking the average. The average tax is also calculated and the details are attached below.
| Parameters | Growth | Average Growth | Projected for 2009 | |
| Net Sales Turnover | 0.283663 | 0.175283 | 0.229473 | 3153.456 |
| Cost of Goods sold | 0.369126 | 0.136424 | 0.252775 | 2941.25 |
| Operating profit | 212.21 | |||
| Other Income | 0.447005 | 0.598726 | 0.522865 | 76.304 |
| Total Extraordinary Income/Expenses | -4.566666667 | |||
| PBDIT | 283.94 | |||
| Depreciation | 0.163444 | 0.150772 | 0.157108 | 33.64556 |
| PBIT | 250.2977733 | |||
| Interest expenditure | 0.732283 | 0.105682 | 0.418983 | 13.7193 |
| PBT | 236.5784733 | |||
| Current Income tax | ||||
| FBT | ||||
| Wealth Tax | ||||
| Deffered tax | ||||
| Profit after taxation | 193.9943481 | |||
| Profit brought forward | 60 | |||
| Profit for appropriation | 253.9943481 | |||
| Dividend | ||||
| Earnings Per Share | Projected EPS | 81.2026055 |
Then with max average last ten prices and last ten minimum prices the P/E Is calculated and the details are as below
| Method 3 | |
| Projected EPS | 81.2 |
| P/E(MAX) | 22.16749 |
| P/E(MIN) | 14.16256 |
The P/E range by this method is projected as 14 -22.
RATIO ANALYSIS
| Years | Mar ‘06 | Mar ‘07 | Mar ‘08 |
| RATIOS | 12 mths | 12 mths | 12 mths |
| Growth OF EPS | -26.408 | 77.2993 | |
| Growth OF Sales | 28.36631 | 17.5283 | |
| Mcap to Sales | 2.478982641 | 1.341349 | 1.221117 |
| ROCE | 4.403470677 | 3.758284 | 1.469652 |
| ROE | 6.128731687 | 4.510255 | 7.996651 |
| Operating profit margin ( as % OI) | 0.117317458 | 0.05855 | 0.089678 |
| Fixed assets turnover ratios | 5.432666392 | 5.608742 | 5.703694 |
| Inventory Turnover Ratios | 10.35938 | 9.111855 | |
| Cash to Sales | 0.012391292 | 0.022066 | 0.016934 |
| Current Ratio | 1.097071209 | 1.184441 | 1.595881 |
| Interest coverage ratio | 40.50787402 | 14.46591 | 24.87359 |
Growth of EPS
It is calculated by year on year. It is seen based on the past three years the company has escaped from negative growth from the last year and it is a good sign for investors and it will develop positive sentiment for investors. However a three year period is not right enough to conclude a performance trend.
Growth of Sales
The growth of sales has come down may be because of inflation rise and demand down and commodity prices seriously getting affected which has an indirect effect on demand. However it’s not a good sign from investor’s point of view and it has to be taken care of. However a three year period is not right enough to conclude a performance trend.
MCAP to sales
It is calculated by
= Number of free float shares* Average price /Sales turnover
It is seen that it is coming down may show that investors are little over bullish about this script irrespective of dip in sales growth etc. However a three year period is not right enough to conclude a performance trend.
ROCE
It is calculated by
=PAT/Total capital
It is seen that it is drastically showing decreasing trend and it is not a good sign from investors long term point of view. Company has to do cost cutting mechanisms to correct this. However the company has taken additional debts in the Financial year 2008(unsecured loans 104 crores) whose benefits may not be capitalized immediately and this should also be taken into consideration.
ROE
It is calculated by
= PAT/Total equity capital
Though it dipped in 2007 it is showing an increasing trend and it is good as for as a company is concerned. The effect of debt capital which has a negative perception in previous ratio is nullified here.
OPERATING MARGIN
It is calculated as
= Operating profit/Net sales turnover
Though it has come down from 2006 to 2007 the company is recovering and it is going up in 2008. which means company is able to mange its cost by cost cutting mechanisms and however a two or three years future trend will be more meaningful to comment on this.
Inventory Turnover Ratio
It is calculated as
= COGS/Average inventory
It is seen that there is a slight dip in this ratio but not a great fall to comment on however it signifies that it was not able to push fast the inventory as it was in the previous year.
Fixed Assets Turnover Ratio
It is calculated as
= Sales turnover/fixed assets (Gross block)
We can see it almost remains constant and it is good that company is managing to convert its assets into sales irrespective of demand fluctuation, inflation etc.
Cash to Sales
It is calculated as
= Cash/Total sales turnover
It is seen that it went up and came down and it shows may be in the last year due to more loans and some expansion activities it has spent more cash and so it has come down.
Current Ratio
It is calculated as
= Current assets (Total) /Current liabilities including Provisions
It is seen that it is going up and it is also within the prescribed range of 1.5 is really good and it is said that company is really finding a balance to match its current liabilities with current assets and good working capital management
Interest Coverage Ratio
It is calculated as
= EBIT/interest
It is seen that it is really going down over years and it has to be taken care of because it may be because it may affect the risk perception of the investors in long run.
FINDINGS
The price range is Rs.1455 to Rs.1570/-.
The P/E is range is 14 to 22.
Caveat: It is however based on our own analysis and it is subjected to change according to methodologies in predicting the Price or P/E. Excel sheet which we have used in this calculation will be provided upon reader request.
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