Sharekhan's research report on Britannia Industries
Britannia Industries (Britannia) Q1FY2023 performance lagged ours as well as street’s expectation with revenues growing by 9% (volumes fell 2%); higher input prices and ad-spends dragged OPM by 274 bps to 13.5%. With a ~20% price hike in the product portfolio, recovery in biscuit sales volumes will take time. In the medium term we expect volume growth to hover at 6-8% led by distribution expansion (especially in Hindi-speaking towns), market share gains and good traction to new launches. Company saw some weakness in the key input prices (including wheat and palm oil) at fag end of the quarter. Management expects margins to bottom-out in Q2 and will improve from H2FY2023 with a consistent fall in commodity prices and benefits from cost efficiency measures.
Britannia’s stock price has run-up by 17% from its recent low and currently trading at 55.9x/44.5x its FY2023/24E EPS. We downgrade our rating on the stock to Hold from Buy with an unchanged PT of Rs. 4000.
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