Motilal Oswal's research report on Britannia Industries
After displaying resilience in 4QFY22 volumes despite steep price hikes, BRIT’s 1QFY23 result was disappointing with a low single-digit volume decline. With further price increases likely in 2QFY23 (cumulative 6-7% price hike in 1HFY23), the effective price hike will be ~20% YoY. This might delay the eventual volume recovery, especially in a price sensitive category like biscuits. BRIT’s 1QFY23 EBITDA margin was also notably lower than expectations at 13.5% (a level last seen in 4QFY15).
Even though we estimate FY24 EBITDA margin to recoup to 16%, BRIT’s valuation is rich at 48.1x FY24E P/E given the tepid earnings CAGR of 11.7% over FY22-24E. We, therefore, downgrade BRIT to Neutral targeting 45x Jun’24E EPS, giving us a TP of INR3,670.
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