Reduce Britannia Industries; target of Rs 5750: Emkay Global Financial

Emkay Global Financial' research report on Britannia Industries

Q2 net sales grew at ~4%, 1%/4% below our estimate/consensus expectation. We see volume decline at ~2% (affected by the GST transition). Q2FY26 earnings (up 23% YoY) surprised (a 15% beat), driven by the phantom stock option’s accounting. Absolute employee spending reduced by 22% YoY (down 150bps as a % of sales); adjusted for the ~Rs500mn payout in Q2FY25, employee spending reduced by 1% YoY. Lower employee spending and opex aided the 295bps expansion in EBITDA margin to 19.7%. The management’s commentary (postGST rate reduction) would be key; we see growth acceleration for low unit packs (LUPs). The company has onboarded Rakshit Hargave as the new CEO; he will be joining on 15-Dec-25.

Outlook

We maintain REDUCE on Britannia, with a Sep-26E TP of Rs5,750, on 48x P/E (in line with its last 5Y average forward P/E).