Fast moving consumer goods (FMCG) company Britannia beat CNBC-TV18 poll estimates on most fronts in its earnings for the January to March 2023 quarter, however, missed revenue and volume growth projections.
Britannia saw its sales volumes grow by a percent during the three month period as against the poll expectation of 4-5 percent. The firm’s consolidated net profit rose 47.5 percent year-on-year to Rs 557.60 crore helped by gains from distribution expansion, cost management and softening commodity prices.
Brokerages have a mixed stance on the company following its results. While JPMorgan and Morgan Stanley have raised their target prices on the firm’s stock with neutral and overweight ratings, respectively, CLSA recommends selling the FMCG company’s shares.
JPMorgan said the firm’s gross margin delivery continued to surprise positively, while revenue growth is likely to rebalance ahead. The company expects EBITDA this fiscal to be similar to that of FY23.
The brokerage expects margin to moderate sequentially to 18 percent in FY24 as pricing moderates, brand spends increase and operating income normalises.
Morgan Stanley, meanwhile, believes that Britannia is leading charge on driving distribution, innovation and premiumisation (DIP) led growth in its biscuit and non-biscuit businesses. It sees the focus on top-line growth over margins as a key strategy going ahead.
CLSA is of the view that Britannia’s price-led growth largely in the past and that the firm’s earnings per share growth in the financial 2023-2024 shall lag peers. It noted that revenue growth cooled down in the fourth quarter while margins remained flat sequentially.
The brokerage expects pricing-led growth shall taper off and that the price cuts may lead to a sequential contraction in margins. It, noted that the FMCG firm’s execution remains strong on all fronts but valuations are full at c.45x FY25 EPS.
Macquarie, meanwhile, said Britannia's sales this fiscal will be led by volume and will be closer to high single digit levels.
It noted that the company guided for a YoY flattish EBITDA margin this year given the need for price cuts. The brokerage said it broadly maintains FY24/25 EPS despite strong gross margin beat in Q4.
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