Playing devil’s advocate here, here is why profit growth has been 38% for the past 5 years:
Look at Brittania’s margins - they have increased from 5.61% to 14.24% (tripled over the last 5 years). Do you expect a simliar tripling over the next 5 years (to a 45% OPM?).
Lets look at it another way. Given a 11% CAGR over the next 3 years, we can expect sales to be ~Rs. 11400 crore. Assuming a 18% OPM (average of other FMCG players), we get operating profit of Rs. 2050 crore. After OI of ~150cr and similiar depreciation, we can assume a 2050 PBT or Rs. 1350 cr PAT given current tax rate of 33%. That means we are trading at ~38x FY20 earnings. Not sure what exit multiple you expect once the current FMCG euphoria dies down (for a sector growing at 6-12% PA), but the risk-reward doesn’t seem favourable to me.
Disc. Not invested. May initiate a short/long position without any updates to this post.