Not a “Good Day”: Britannia market cap erodes by $2 billion in 2 days!

A lower-than expected earnings in September quarter and not-so-promising commentary from the management for the next quarter sent the Britannia’s stock to a six-month low on Tuesday. Shares of the company extended their fall for the second day, wiping out $2.05 billion of investor wealth in just two sessions.

To put this in perspective, the two-day loss in company’s share price is more than what it generated as revenue over the last four quarters. The company reported a revenue of $2.03 billion in last twelve months through September 2024, show Bloomberg data.

The miss in earnings was largely due to slowdown in demand and heightened inflation. Prices of most of its raw materials surged during the quarter and the latest import duty of 40% on palm oil further dented its operating margin. However, the company aims to operate within a consistent band of margins, with no expectation of dramatic changes.

Morgan Stanley, which has an “Equalweight” rating on the stock with a twelve-month target price of ₹5157 observes that inflation hurts demand and profit of Britannia Industries. The EBITDA margin of Britannia decreased by 281 bais points (bps) YoY and 239 (bps) on a quarter on quarter basis, which stood at 17.2%.

According to the brokerage, the company had earlier guided its revenue growth to be in line with volume growth by Q3 and was aspiring to double-digit volume growth in FY25. “Downside risk to this guidance seems likely,” Morgan Stanley wrote in an investor note.

The entire Street seems disappointed with the company’s Q2 performance. While Macquarie downgraded the stock to “underperform” from “neutral”, JP Morgan cut its 12-month target price to ₹5270 from the earlier target price of ₹5670. The stock ended Tuesday’s session at ₹5027.55 on the NSE, down 7.5% from the previous close. As of close, the company commanded a market capitalisation of $14.4 billion (₹1.2 lakh crore)

During the quarter, the net profit of Britannia Industries declined nearly 10% to ₹531.5 crore. Similarly, its revenue for the quarter came in at ₹4,667.6 crore, up 5.3% from a year ago. That compares with a CNBC-TV18 poll estimate of ₹4,697 crore for the quarter.

With the Tuesday’s fall, the stock of Britannia Industries has turned negative for the year. Between January and now, the stock has come off by 5.9% and is headed for the first yearly loss since 2020.

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