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Macquarie upbeat on HUL, ITC, Jubilant Foodworks but not bullish on Britannia Industries

Updated : November 14, 2018 12:58:15 IST

Macquarie on Wednesday said it's upbeat on Hindustan Unilever (HUL), ITC Ltd and Jubilant Foodworks, but not bullish on Britannia Industries.

In an interview to CNBC-TV18, Amit Sinha, senior analyst-consumer, said, "HUL is on a strong footing on account of significant investments in supply chain, distribution and data analytic side. The company is gaining market share on across various segments."

Sinha said HUL is is also into costs savings programme helping margin expansion, "On valuation side, the company is trading close to 43 times FY20 numbers and we believe these valuations are sustainable."

With regards to ITC, Sinha said the house liked the company at current valuations as there has been recovery in volumes. Even on the cigarette EBIT (Earnings Before Interest and Taxes) growth side, there has been recovery in last few quarter.

On their FMCG business, he said ITC has shown improvement in margins. Although on the calamity tax side, there remains an overhang. At current price, the risk reward is favourable for the ITC.

With regards to Jubilant Foodworks, he said the management of the company has taken right decisions to invest on product quality and to enhance value proposition of product profile.

"Competition will impact Jubilant Foodworks' cost inflation but on the demand side, the impact is lower, said Sinha, adding that the company has enough levers to tackle cost inflation.

Further, Sinha said Jubilant is poised to deliver double-digit same store sales growth (SSG) on run-rate basis going forward.

Talking on Britannia Industries, Sinha said, "While the global total foods company ambition is strong, it will entail significant cost inflation, which street is not able to capture,” he said.

The house has built-in significantly lower earnings for Britannia because of lower margins, he added, "We are building in 14-15 percent EPS (Earnings Per Share) CAGR (Compound Annual Growth Rate) for Britannia, while the street is at 20 percent plus."
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