Emkay Global Financial' research report on Britannia Industries
Q1 results were in line, adjusting for the Phantom Stock Option Scheme expenses. Under this scheme, employees are being incentivized with a Rs520mn payout, based on 19% stock price return. We believe this arrangement could weigh on near-term performance, as any stock price appreciation from strong execution will be rewarded back to the management, impacting reported financials. The management aims to offset the impact from next year. We find the recent actions to be accretive, ie: a) a sharper focus on health and indulgence through new launches; b) faster growth in Quick Commerce (now 3% of sales; 500bps higher market share), and c) healthy price hikes, along with expected RM stability. Our double-digit earnings growth forecast for FY26E remains intact, even after the 5% earnings cut. As the stock appears to be fairly valued, the employee cost impact from the scheme seems immaterial.
Outlook
We maintain REDUCE, lowering our Jun-26E TP by 6% to Rs5,500, based on 48x P/E (revised from 50x, now aligned with the 5Y average forward P/E).
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