Britannia Q2FY22 Results Preview | Revenue to increase 6-8%, PAT to decline 12-14% due to higher input costs

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Britannia Industries Ltd, one of India’s oldest biscuit makers, is set to declare its results on November 8 for the quarter ended September 2021.

The experts are expecting it to report an annualised growth of about 6-8 percent in consolidated revenues while the margins are expected to contract on the back of higher agri input prices due to which profit after tax (PAT) is expected to decline by about 12-14 percent on a y-o-y basis.

The company had reported consolidated revenues of Rs 3,419 crore during the same period last year with PAT coming in at Rs 498 crore. During the first quarter of this financial year, the revenues stood at Rs 3,404 crore and PAT at Rs 390 crore.

Phillip Capital expects the company’s revenues to witness an increase of 8.7 percent on a y-o-y basis to Rs 3,716 crore. The brokerage expects “mid-single-digit volume growth despite high base owing to availability of entire range, focus on Milk biscuits segment and increase in distribution network”.

Gross margins are expected to be impacted by about 233 bps y-o-y to 39.1 percent owing to inferior SKU and brand mix while EBITDA (earnings before interest, tax, depreciation and amortisation) margin is expected at 17.1 percent, down 306 bps from 20.1 percent reported in the same period last year. On a sequential basis, the EBITDA margins are seen improving marginally by 55 bps.

The brokerage highlights that the EBITDA margins are getting knocked down “due to higher freight costs, negative operating leverage and increased competitive intensity”.

The muted operating performance of the company will result in a 9.5 percent y-o-y decline in PAT to Rs 451 crore, says the brokerage.

Axis Securities expects a 6.2 percent increase in revenues on an annualised basis to Rs 3,630 crore. The volume growth on a y-o-y basis in this quarter is expected to be 4 percent compared to a volume growth of 9 percent witnessed in the same period of last financial year.

EBITDA for the company is expected at Rs 604 crore, down by around 11 percent from Rs 675 crore in the previous year. On a q-o-q basis, EBITDA is seen improving by 9 percent from Rs 554 crore.

As per the brokerage, “the gross margins are expected to contract by 250 bps y-o-y amid rise in costs for agri-commodities and packaging costs.” This will have an adverse impact on the EBITDA margins as well which are expected to decline by 312 bps to 16.6 percent.

It expects the company to report a PAT of Rs 430 crore, down 13.2 percent on a y-o-y basis but up 11.1 percent on a sequential basis.

It highlights the things that need to be monitored -- demand environment, raw material cost outlook, market share trends and update on Inter Corporate Deposits (ICDs).

Just like Axis Securities, Motilal Oswal expects volume growth of 4 percent in this quarter compared to 9 percent volume growth witnessed in the same period last year. However, it expects a 2 percent annualised growth in revenues to Rs 3,490 crore in this quarter.

The brokerage expects an EBITDA of Rs 580 crore which is a decline of 13.8 percent from last year and an EBITDA margin of 16.7 percent in this quarter.

The brokerage says that the cost-saving initiatives undertaken by the company helped reduce the impact of higher agri prices.

The company is expected to report a PAT of Rs 430 crore, down 13.9 percent over last year. Raw material cost outlook and update on ICDs will be the key things to watch out for, the brokerage says.

Kotak Institutional Equities predicts the revenues to rise by 6.1 percent on a y-o-y basis to Rs 3,627 crore. It expects 3.5 percent y-o-y domestic volume growth in biscuits and 2.5 percent growth in contribution from price-mix.

The brokerage adds, “We expect consolidated gross margin to remain under pressure, declining 360 bps y-o-y. Price increases should support marginal q-o-q improvement in gross margin.” It expects an EBITDA of Rs 613 crore, down 9.2 percent from last year which will result in 285 bps y-o-y decline in EBITDA margins to 16.9 percent. Consequently, PAT is expected to decline 14.2 percent y-o-y to Rs 428 crore in this quarter.

The stock closed at Rs 3,652.6 on November 5, up Rs 22.75 from its previous close. The stock has been underperforming and has been flat during the past one year, generating marginal returns of 5 percent. This year, the stock is up only 2 percent and has declined 6 percent in the past one month.