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Britannia Q3 preview: Analysts see 20%YoY jump in PAT, 9% volume growth

As India gets on its feet amid ease in Covid-19-induced restrictions, and out-of-home consumption picks up, FMCG firm Britannia Industries’ bottom-line earnings may come under pressure owing to weaker sales on a quarterly basis, and increase in input costs.

“While Q3FY21 performance is likely to show signs of recovery led by sustained rural demand and gradual pickup in urban demand post unlock and normalization of supply chain, we believe margins for select players will start correcting QoQ given rising commodity costs and comeback of ad spends, marketing and overhead expenses,” say analysts at Prabhudas Lilladher.

That said, sustained rural demand due to better rural economics driven by a strong kharif and rabi seasons, analysts at Sharekhan believe an over 9 per cent sales’ volume growth may support Britannia’s overall Q3 show.

At the bourses, the stock of the firm slipped around 6 per cent during the period under study, as against a 25.4 per cent gain in the benchmark S&P BSE Sensex, and a 14 per cent rise in the S&P BSE FMCG index, ACE Equity data show.

Here’s what top brokerages expect from Britannia’s Q3 earnings:

Prabhudas Lilladher
The brokerage estimates flat quarter-on-quarter (QoQ) volume growth and peaked out gross margin and Ebitda margins given unlock led softening of demand and increase in raw material and overhead costs. It estimates 15 per cent YoY growth in earnings before interest, tax, depreciation, and amortization (Ebitda) to Rs 575.8 crore from Rs 502 crore in Q3FY20. Sequentially, Ebitda may decline 14.6 per cent.

HDFC Securities
The brokerage, too, projects around 11.11 per cent QoQ decline in Ebitda at Rs 600 crore from Rs 675.4 crore reported in the September quarter of the current fiscal, and sees flat sequential growth in sales at Rs 3,250 crore.

The Ebitda margin is projected to drop 138 bps QoQ but expand 154 bps YoY to 18.4 per cent in the quarter under review.

Motilal Oswal Financial Services
Analysts here peg the net sales at Rs 3,280.9 crore in Q3FY21, up 10 per cent YoY from Rs 2,982.7 crore. Sales were Rs 3,419.1 crore in Q2FY21.

Furthermore, with a gross profit of Rs 1,378 crore, the gross profit margin is seen at 42 per cent, marginally higher from 40.9 per cent in Q3FY30 but down from 42.5 per cent in Q2FY21.

Overall, the profit after tax is seen improving 23.3 per cent YoY to Rs 455.5 crore, compared with a PAT of Rs 369.6 crore clocked in Q3FY20. Compared with Q2FY21, the PAT could decline 8 per cent.

“We would watch out for commentary on demand trends. Besides, outlook on raw material and comment on NCD would remain key monitorable,” the brokerage said.

Kotak Institutional Equities
“We continue to build moderation in biscuits demand (post the spike in in-home consumption) but still much better than pre-Covid level. Biscuits being the cheapest products in the branded packaged foods space could aid strong demand, particularly in rural areas. We model 8.5 per cent YoY growth in biscuits volumes (standalone) in Q3FY21 along with 1.5 per cent growth in price/mix,” it said in its result preview note.

With an Ebitda of Rs 580.4 crore and Ebit of Rs 530.7 crore, pre-tax profit is projected at Rs 541.2 crore, up 9 per cent on year from Rs 496.9 crore, and down 19.3 per cent on quarter from Rs 670.6 crore. Adjusted for tax, the net profit may decline 19.3 per cent QoQ to Rs 402.2 crore from Rs 498.7 crore logged in the September quarter of FY21.

“We expect consolidated Ebitda margin to expand 83 bps YoY aided by 56 bps expansion in GM and operating leverage gains. For the standalone business, we expect gross margin expansion to be restricted to 33 bps YoY post the strong 114 bps YoY expansion in the previous quarter,” it added.

Edelweiss Securities
The brokerage expects Britannia’s revenue, Ebitda, and PAT to grow 9.5 per cent, 16.9 per cent, and 22.3 per cent YoY, respectively. Price hikes are about 2.5 per cent YoY.

“With lockdown easing, we believe the growth rate -- which came off in Q2FY21 -- will further come off this quarter leading to volume slowdown sequentially. Therefore, we expect Britannia to post volume growth of around 7 per cent on year on a base of 3 per cent,” it said, adding “reasons for moderation in growth for biscuits are a pickup in out-of-home consumption as QSRs’ delivery/takeaways are logging YoY growth”.

The brokerage notes that the price hike has been about 2.5 per cent in the quarter as raw material trend remained slightly inflationary. In this backdrop, cost efficiencies may aid Ebitda margin level; hence they expect 120 bps YoY expansion in margin.

It expects Britannia to clock domestic business volume growth of 7-8 per cent year-on-year. While steady volume growth and margin expansion would help PAT to grow by over 20 per cent YoY, it may dip 9 per cent QoQ to Rs 451.5 crore, it noted.  

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