Nirmal Bang Institutional Equities said India’s branded packaged foods market is now valued at $40 billion and is growing rapidly, thereby offering immense scope for growth. Most companies are expanding their total as well direct reach along with significant capacity expansions, it said as it remains structurally positive on three companies: Britannia Industries Ltd, Tata Consumer Products Ltd (TCPL) and Gillette India Ltd in the listed space with Britannia being its preferred pick.
Nirmal Bang said Britannia has been investing heavily over the past few years on expanding its distribution reach, capacity expansion, tie-ups and innovation, so as to take optimum advantage of the large opportunity.
Now that these investments have been completed/are nearing completion, the next few years could see significantly higher top line growth once the near term impact on demand caused by high inflation dissipates, thus continuing the period of clear outperformance against FMCG peers.
“We are currently building in 13 per cent/15.5 per cent sales/PAT CAGR for Britannia over FY24E-FY26E. While current valuation of 49 times/42 times FY25E/FY26E is not cheap, sustained strong mid-teens earnings growth in the next few years looks possible - unlike the rest of the Staples space. We value Britannia at 52 times December 2025E EPS, given the structurally attractive opportunity in the packaged foods space, high return on equity vs peers in domestic staples, healthy dividend payout and potential addition of new categories going ahead,” Nirmal Bang said.
The brokerage has a Buy rating and a target price of Rs 5,910 for Britannia.
Nirmal Bang also remains positive on Gillette India. While return ratios were always healthy for Gillette and dividend payout has been increasing in recent years, growth in top line as well as earnings, which was lacking, also seems to have revived over the past few years.
“Valuation is inexpensive at 43 times FY25E EPS (despite nearly 40 per cent run-up in the stock since our detailed report in June 2023), especially if double-digit earnings growth can sustain. We have a Buy with a price target of Rs 7,915, valuing the company at 50 times December 2025 EPS.
Meanwhile, Nirmal Bang also has a ‘Buy’ rating on Tata Consumer, as it remains positive on the company over the medium to long term on the back of: improvement in margins and gradual recovery in volume growth in the core businesses of India Foods as well as India Beverages.
It also likes TCPL’s premiumisation initiatives (particularly in salt) and robust growth in new businesses including recent acquisitions of Capital Foods and Organic India.
“The stock is currently trading at 64 times/48 times FY25E/FY26E. We value the company at 55 times December 2025 EPS with a target price of Rs 1,305.