Britannia declines 5% as Q2 revenue slightly misses analysts' expectations

Emkay Global has maintained a "BUY" rating on the stock.
Shares of Britannia Industries slipped as much as 5 per cent to Rs 3,585 apiece on the BSE on Tuesday, a day after the company reported a 22.96 per cent increase in consolidated net profit at Rs 495.20 crore for the quarter ended September.

Total revenue from operations climbed 12.15 per cent to Rs 3,419.11 crore during the quarter under review as against Rs 3,048.44 crore in the year-ago period. READ MORE

According to analysts, Britannia's revenue growth moderation for the quarter under review was a shade higher than expectations. However, its margins remained strong from continuing cost efficiency and low input prices. The company's earnings before interest, tax, depreciation, and amortisation (EBITDA) margin expanded 360 bps year-on-year (YoY) to 19.8 per cent.

At 09:46 AM, the stock was trading over 4 per cent lower at Rs 3,608 on the BSE. In comparison, the benchmark S&P BSE Sensex was trading 0.38 per cent higher at 40,584 levels. 

"Revenue growth moderated to 12 per cent and was slightly below estimates. However, earnings momentum remained strong at 23 per cent, beating estimates by 6 per cent, led by strong margins from cost efficiencies," said analysts at Emkay Global in a result review note. 

Adding, "With unlocking, tailwinds from in-home consumption seem to be declining. However, BRIT still offers a healthy growth outlook, given its strong portfolio expansion and execution, along with improved demand trends in rural areas."

The brokerage has maintained a "BUY" rating on the stock given its reasonable valuation with the target price of Rs 4,500.

Analysts at Edelweiss Securities have also given a "BUY" rating on the stock with the target price of Rs 4,420. "With 9 per cent volume growth in Q2FY21 vs 21.5 per cent in Q1FY21, it reaffirms what we have been highlighting regarding biscuits slowing down as out of home consumption sees recovery. We believe despite the tapering off Britannia will probably report the highest revenue growth in the sector," the brokerage said in a note post result announcement.

“Covid-19 has brought about a situation whereby we are witnessing tectonic shifts in economic growth and consumer behaviour across the world. While the government ended the lockdown, it will take a while for the situation to normalize,” said Varun Berry, managing director, Britannia Industries. “These times have reinforced the importance of giving back to the society and community at large and we are making headway into creating a business which conjoins sustainability & profitability,” he said.


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