Britannia Industries Ltd is expected to report a year-on-year (YoY) as well as sequential improvement in consolidated net profit for the first quarter of the financial year 2022-23 when declares its results on August 4.
The growth is likely to be driven by price hikes and grammage cuts, industryspeak for tweaking weight of a product, even as raw material inflation continues to impact the margins.
On a YoY basis, the consolidated profit after tax (PAT) is likely to grow 4.7 percent on the back of a 12.7 percent growth in consolidated revenue, according to an average of estimates of six brokerages polled by Moneycontrol.
On a sequential basis, PAT is seen increasing by 7.4 percent and revenue 7.7 percent.
One of the largest confectioners of the country, Britannia is expected to report a consolidated PAT of Rs 408 crore on consolidated revenue of Rs 3,824 crore for the June quarter.
The company had recorded a consolidated PAT of Rs 390 crore during the corresponding period of the last year on consolidated revenue of Rs 3,404 crore.
During the January–March period, the company registered a PAT of Rs 380 crore when it achieved revenue of Rs 3,551 crore.
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The brokerages expect the growth in revenue to come from a flat to mid-single digit increase in volumes coupled with double-digit price hikes undertaken the company during the quarter.
“We model flat YoY domestic volumes and +13 percent YoY contribution from price-mix and we also build some improvement in 3- year volume CAGR trends (6.5 percent in Q1FY23 versus 3.5-4 percent in Q3-Q4FY22) led by market share gains and good traction in new launches partly offset by weakening macro and grammage cuts in price-point packs”, Kotak Institutional Equities said in a report.
Brokerages do not expect any major changes in the consumption patterns from the previous quarter.
The raw material inflation is likely to continue to eat into the margins of the company as the EBITDA (earnings before interest, tax, depreciation and amortization) margins are likely to shrink by 140 bps on year to 14.9 percent compared to 16.3 percent during the year ago period. On a sequential basis, the EBITDA margins are seen declining by 60 bps.
The raw material cost inflation is likely to keep gross margins under pressure but the cost-saving initiatives are likely to cushion the impact on the EBITDA margins.
“We expect consolidated gross margin to decline 245 bps YoY due to RM inflation, partly offset by price increases/ grammage cuts while consolidated EBITDA margin is expected to decline 130 bps YoY despite 245 bps GM moderation, aided by lower advertising & promotion spends and other expenses,” Kotak analysts said.
The key monitorables from the management’s commentary would be the outlook on raw material costs and the status of inter-corporate deposits. The demand outlook and status of new initiatives would also be watched.
The stock closed Rs 18.15 lower at Rs 3,770 on August 3 on the National Stock Exchange. The stock has gained 5 percent over the past year and month.
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