Britannia Jumps 10% on Robust Q2 Results, M-Cap Hits Rs 1 Lakh Crore; Should you Invest?

Shares of Britannia Industries Ltd jumped as much as 10 per cent to hit a record high of Rs 4,181 apiece on the BSE in Monday’s early deals, after the Good Day and Tiger biscuits maker reported late Friday a 28.4 per cent jump in second-quarter consolidated net profit at Rs 490.58 crore, helped by volume growth. The share surge boosted the company’s market cap to Rs 1 lakh crore.

At 9.30 am, Britannia Industries was quoting at Rs 4,175.90, up Rs 374.60, or 9.85 percent, on BSE. It touched an intraday high of Rs 4,178.25, also its 52-week high, and an intraday low of Rs 3,935.

It was trading with volumes of 34,072 shares, compared to its five-day average of 14,101 shares, an increase of 141.64 per cent.

The company’s consolidated revenue from operations jumped 21 per cent YoY to Rs 4,379.61 crore from Rs 3,607.37 crore, the firm said on November 4.

“Our go-to-market strategy and increase in distribution reach have converged to deliver a robust topline growth, aided by a mid-single-digit volume growth, as we record our highest quarterly revenue. We continue to have aggressive market share gains, consistently over the past 38 quarters and registered a 15-year high,” managing director Varun Berry said.

On cost and profitability front, commodity inflation remained on the boil on the back of rising inflation in flour and milk products. As a result of pricing actions and intensified cost efficiency programme, the company was able to improve our operating margins beyond pre-COVID levels, Berry said.

Should you Invest in a Bite of Britannia?

“Britannia has seen one of the most resilient (core) performance in the last three years (backed by share gains). Consensus expects Britannia to invest in new categories, till now, pressure on core margins was not providing ammunition. That said, it will now have to re-earn the multiple as consensus was generous in previous re-rating cycle. Going forward, success of new segments and ramp-up of adjacent categories is imperative. The outlook on this appears better,” said brokerage firm ICICI Securities which has upgraded Britannia shares’ rating to ADD and has raised target price to Rs 4,300 (from Rs 3,650).

Britannia Industries reported a robust set of numbers with revenue and EBITDA beating both our/consensus estimates by 6 per cent/7 per cent and 14 per cent/19 per cent, respectively, as per analysts at another brokerage and research firm Edelweiss, as a positive surprise came from margins with both gross and EBITDA margins growing YoY/QoQ.

“It saw multiple product launches across categories and saw strong growth. Overall, revenue momentum was a positive, led by the biscuits category. This ties up with our anti-consensus stance that biscuits is one of the few categories that is seeing revival in consumption. We continue to remain positive on Britannia,” the note stated. The brokerage house has maintained its Buy rating on the FMCG stock with a target price of Rs 4,620 per share.

Macquarie has a neutral call on the stock with the target at Rs 3,750 per share. It is of the view that Q2 EBITDA was better than expected with a rise in net debt, which would fund the dividend payout. “Input cost pressures is a concern,” it said.

Goldman Sachs also has a neutral call, with the target at Rs 4,000 a share. It feels that the large beat in Q2 was driven by the acceleration in revenue growth to 21 percent YoY, while large price increases did not cause any slowdown in volume.

“Distribution expansion and market share gains are the key drivers for revenue growth. EBITDA margin also recovered more than expected,” it added.

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