Britannia Q4 preview: Here's what to look out for in the numbers

Good Day and Tiger Biscuit-maker Britannia Industries is expected to report a strong set of numbers for January-March quarter of FY21 (Q4FY21) as consumer goods’ demand reaches pre-Covid levels. Analysts forecast a high, single-digit growth in sales volume along with up to 25 per cent YoY growth in net profit for the FMCG giant, which is slated to report its Q4 results on Tuesday, April 27. 

“We expect Britannia to build on its strategic pillars of innovations, affordable packs/pricing, direct distribution, adjacent product segments (cake, Cream wafers, salted snacks, milkshakes), cost efficiency programs, and high growth in Hindi heartland (1.3-1.6x) to report solid set of numbers in Q4,” noted analysts at Prabhudas Lilladher in an earnings preview report.

The brokerage notes that the Bengaluru headquartered firm has declared dividend worth Rs 62 for FY21, suggesting a payout of 75 per cent, which will increase return on equity (ROE) to 75 per cent by FY23. “Although we have cut our EPS estimates for FY22/23 by 1 per cent/2 per cent to account for dividend paid, we maintain BUY rating on the stock with a target price of Rs 4,189 per share,” they said.

The stock is currently quoting at Rs 3,651, and is 9 per cent down from its 52-week high level of Rs 4,015 per share, touched on July 21, 2020. On a year-to-date (YTD) basis, the counter has outperformed the Nifty FMCG index but has underperformed the benchmark Nifty50. Britannia is up 2 per cent so far in CY21 as against a 2.5 per cent rise in the Nifty50 and 1.3 per cent decline in the Nifty FMCG index, ACE Equity data show. 

Here’s what key brokerages expect from the company’s Q4 results:

Kotak Institutional Equities

Given the stable to moderating biscuits demand post the Covid-19 led spike seen in 1HFY2021, the brokerage expects Britannia’s revenue to grow 8.5 per cent year-on-year (YoY) to Rs 3,111.8 crore, but slip around 2 per cent quarter on quarter (QoQ). In the year-ago quarter, the consolidated revenue was Rs 2,867.7 crore while in the previous quarter of the current fiscal, it was Rs 3,165.6 crore.

The brokerage is factoring-in 8 per cent volume growth and 1.6 per cent price-mix growth in standalone business.

“We model around 50 bps QoQ contraction in gross margin to 42.6 per cent (from 43.1 per cent) given input cost pressures (Palm Oil). Further, we model 60 bps QoQ decline in Ebitda margin to 16.8 per cent (19.3 per cent) given gross margin pressures and higher A&P spends to support new launches,” it added.

That said, gross/Ebitda margin may expand 300/290 bps YoY, respectively, from 39.7 per cent and 15.8 per cent.

Emkay Global

Assuming an 8 per cent YoY growth in sales volume, the brokerage is forecasting a 9 per cent YoY, but -1 per cent QoQ, improvement in revenue at Rs 3,133 crore for the quarter under study. Ebitda, meanwhile, is pegged at Rs 593.2 crore, clocking a notable growth of 31 per cent YoY from Rs 454.3 crore. In the December quarter, the same was Rs 611.5 crore.

“Moderation in wheat and skimmed milk prices (SMP) prices is likely to help expand gross margins by 330bps while cost savings could drive Ebitda margin expansion of 300bps YoY to 18.9 per cent,” it said.

However, lower tax rate in base quarter may limit consolidated net profit growth to Rs 432.6 crore, up 16 per cent YoY but down 4 per cent QoQ. The same was Rs 372.6 crore in Q4FY20 and Rs 452.6 crore in Q3FY21. The pre-tax profit, it says, could grow 28 per cent YoY to Rs 585.2 crore from Rs 457.4 crore. 

Prabhudas Lilladher

On a standalone basis, the brokerage presumes a 10 per cent YoY growth in PAT at Rs 419.9 crore, up from Rs 381.2 crore reported in Q4FY20. 

“Gross margin and Ebitda margins have peaked out given unlock led softening of demand and increase in RM and Overheads. We expect 270bps margin expansion and 29.5 per cent Ebitda growth YoY as Q4FY20 was impacted due to lockdown,” it said.

HDFC Securities

A slightly optimistic stance on the firm leads the brokerage to forecast 2.2 per cent sequential decline in net profit at Rs 440 crore while Ebitda may decrease 7.5 per cent QoQ to Rs 570 crore. Revenue, meanwhile, is seen flat QoQ at Rs 3,120 crore.

“We model 333bps YoY expansion in gross margin driven by better product mix. Besides, focus on cost optimisation by the company will result in Ebitda margin expansion of 230bps YoY to 18.1 per cent,” it said in its result preview report.

The brokerage will eye the management’s commentary on downtrading trends, new launches, and completion of the plants.