3 weeks ago
The shares of biscuit maker Britannia Industries will be in focus on November 12, a day after the company reported its September quarter results that largely missed CNBC-TV18 poll projections.
Britannia posted a smaller-than-expected second-quarter profit hurt by weaker demand for consumer goods, particularly in urban areas amid high inflation. Even as revenue and volumes were in line with expectations, operational numbers were below estimates.
On November 11, ahead of Q2 results, Britannia shares fell almost 6%. Though in the past months the stock has slipped nearly 10%, it has made investors 15% wealthier in the one-year period. This, however, underperforms the benchmark Nifty 50’s rise of 24% in the past year.
Brokerage firm Nomura pointed to another quarter of below-than-expected results. The brokerage has maintained its neutral call on the stock and has set the target price at ₹5,800, which means it still expects a potential upside of 7% in the stock price from its Monday close.
Morgan Stanley, meanwhile, has an equal-weight stance on the FMCG company with a target price of ₹5,424, just a few points higher than the previous close on NSE.
The brokerage highlighted that inflation hurts Britannia’s demand and profit. It had earlier guided revenue growth to be in-line with volume growth by the third quarter of FY25, however, it sees a likely downside risk to the guidance.
Nuvama Institutional Equities, meanwhile, has retained its buy call but has said that it may revisit estimates and target of ₹7,010 after the company’s earnings conference call.
According to the brokerage, the Q2 miss on certain parameters was majorly due to higher staff costs, which were up 45% year-on-year and this likely includes one-off SARs/ESOPs. Excluding this one-off, the EBITDA is largely in-line with Nuvam’s estimate but lower than consensus.
“The company adjusted to rising commodity costs through focused pricing actions and cost-cutting measures. It remains committed to its ‘Total Global Foods Company’ vision by investing in capabilities, brands, and distribution strategies. Early results from distribution pilots across 25 cities covering more than 50,000 outlets have been encouraging,” the brokerage note on Britannia reads.
The brokerage commentary comes after Varun Berry, Vice Chairman and Managing Director, said, "An 8% volume growth with a sequential increase in revenue and operating profits are satisfactory results in the face of severe commodity inflation leading to a tepid consumer demand scenario in most FMCG categories.”
He added that in the context of a steep rise in prices of key commodities such as wheat, palm, cocoa etc, the firm has demonstrated agility in initiating focused pricing actions and identifying new levers for cost optimisation across the value chain. “As a result, we maintained a healthy operating margin of 15.5% during the quarter."
