Britannia dips 9% in 2 days, hits over 5-mth low; brokerages mixed

Britannia reported its Q2FY25 results on Monday, after market hours. PAT declined by 9.6 per cent to Rs 531 crore

Britannia Industries shares slipped 5.6 per cent in trade on Tuesday, November 12, 2024, and registered an intraday low of Rs 5,120 per share on BSE. The stock slipped over 10 per cent in 2 days and hit over five-month low; lowest level since June 4, 2024.  The biscuit maker's shares declined after reporting a fall of 9.6 per cent in profit after tax (PAT) for Q2FY25 to Rs 531 crore as compared to Rs 588 crore a year earlier. Brokerages have mixed views on Britannia's second quarter ended September 30, 2024, financial performance.

Here is how brokerages view the Q2 results of Britannia:

Nomura:

Britannia's volume growth of 8 per cent was below our estimates of 10 per cent to 11 per cent. Volumes were affected by a tepid consumer demand scenario given severe food inflation.

 

Pricing declined by 3.5 per cent in line with our estimates of 3.4 per cent. Meanwhile, the consolidated sales grew 4 per cent Y-o-Y, while revenue (including other operating income) grew 5.3 per cent Y-o-Y to Rs 4,667 crore below our forecast of 8.6 per cent Y-o-Y to Rs 4,820  and the Bloomberg consensus estimate of 8.6 per cent  Y-o-Y to Rs 4,740 crore.

 

The gross profit margin (GPM) contracted by 136 bps Y-o-Y and -188 bps Q-o-Q to 41.5 per cent, below our forecast of 43 per cent due to a steep rise in the prices of key commodities such as wheat, palm, cocoa, etc.

 

The biscuit maker's operating profit margin (OPM) contracted by 290 bps Y-o-Y and -95 bps Q-o-Q to 16.8 per cent below our forecast and the Bloomberg consensus estimate of 20.2 per cent and 18.9 per cent, respectively. There seems to be a one-off in employee costs of 45 per cent Y-o-Y but there was no explanation for the same.

 

The company's Ebitda declined 10.2 per cent Y-o-Y to Rs 780 crore and was below our forecast of 11.8 per cent Y-o-Y growth to Rs 970 crore and the Bloomberg consensus estimate of 3 per cent Y-o-Y to Rs 890 crore.

 

The company's adjusted PAT declined by 9.5 per cent Y-o-Y to Rs 530 crore below our forecast of 15.9 per cent Y-o-Y to Rs 680 crore and the Bloomberg consensus estimate of 7 per cent Y-o-Y growth to Rs 630 crore. We await more details from the results call on 12 November.

 

The brokerage maintained a 'Neutral' rating on the stock and iterated the target price of Rs 5,800.  

Motilal Oswal:

Britannia Industries'consolidated net sales (excluding other operating income) rose 4.5 per cent Y-o-Y to Rs 4,570 crore as compared to our estimate of Rs 4,670 crore during the quarter. 

 

The company's consolidated revenue rose 5 per cent Y-o-Y to Rs 4,670 crore in line with our estimate of Rs 4,740 crore. The company delivered 8 per cent volume growth in 2Q, we estimated the growth by 9 per cent. 

 

The consolidated gross margin contracted 135 bps/190 bps Y-o-Y/Q-o-Q to 41.5 per cent as compared to an estimate of 43.7 per cent. Employee and other expenses were up 45 per cent and 4 per cent Y-o-Y. 

 

Meanwhile, the company's Ebitda margin contracted to 290 bps/90 bps Y-o-Y/Q-o-Q to 16.8 per cent as compared to an estimate of 19.7 per cent.  

 

Its consolidated Ebitda/PBT/Adj. PAT declined 10 per cent/10 per cent/9 per cent Y-o-Y to Rs 780 crore/ Rs 720 crore/ Rs 530 crore against the estimate of Rs 930 crore/Rs 870 crore/Rs 650 crore. 

 

Nuvama Institutional Equities:

Britannia’s Q2FY25 revenue came in at Rs 4,667.57 crore as compared to Rs 4,432.88 crore a year ago, up 5.3 per cent year-on-year (Y-o-Y) and was in line with our estimates. Meanwhile, Ebitda/ PAT each down 10 per cent Y-o-Ywere below our estimates. 

 

Additionally, the company's volumes grew 8 per cent Y-o-Y, exactly in line with our estimate. 

 

Britannia's gross margin dipped by 185 basis points (bps)/153 bps to 40.2 per cent and Ebitda margins at 16.8 per cent dipped 290 bps Y-o-Y/ 95bps quarter-on-quarter (Q-o-Q). It was majorly due to higher staff costs, which were up 45 per cent Y-o-Y. Excluding this one-off, the Ebitda is largely in line with our estimate but lower than consensus. 

 

We will revisit our estimates and target price post the earnings conference call. Maintain ‘Buy’.

 

That apart, as per reports, Investec has maintained a 'Hold' rating on Britannia and cut the target price to Rs 5,770 per share, Morgan Stanley has continued an 'Equalweight' rating and cut the target price to Rs 5,424 per share and Goldman Sachs has iterated 'Neutral' rating and cut target price to Rs 5,350 per share. 

Britannia Q2 results

In its Q2, reported on Monday, after market hours, the company posted consolidated revenue from operations at Rs 4,667.57 crore as compared to Rs 4,432.88 crore a year ago, up 5.3 per cent.  The Earnings before interest, tax, amortisation, and depreciation (Ebitda) for the quarter under review stood at Rs 783 crore, down 10 per cent, as compared to Rs 872 crore. Similarly, Ebitda margins for the quarter stood at 16.8 per cent as compared to 19.7 per cent a year ago.