Britannia Industries: Analyst Recommends HOLD Amidst Q3FY24 Results

Britannia Industries: Analyst Recommends HOLD Amidst Q3FY24 Results

VoM News Desk | February 8, 2024 | 12:47 PM IST | Breaking News | Follow on Google News

Britannia Industries: Analyst Recommends HOLD Amidst Q3FY24 Results

Britannia Industries: Analyst Recommends HOLD Amidst Q3FY24 Results

Amnish Aggarwal, Head of Research at Prabhudas Lilladher, recommends a ‘HOLD’ rating for Britannia Industries with a Current Market Price (CMP) of ₹5,078 and a Target Price (TP) of ₹5,157.

Q3FY24 Result Highlights:

1. Volume Growth and Price Cuts: Volumes increased by approximately 5.5%, propelled by higher grammage and a 3% reduction in prices, contributing to volume growth.
2. Market Share Gains and New Launches: Britannia experienced market share gains in the Hindi-belt and saw success with new launches, including Jim Jam Pops, Golmaal, Makhana, and Laughing Cow cheese.
3. Earnings Estimate Adjustments: EPS estimates for FY24/25/26 have been revised downward by 2.5/2.3/5.8% due to short-term sales pressures amidst rising competition from regional players. Additionally, a 90bps decline in EBIDTA margins over FY24-26 is anticipated.
4. Tepid Profit Growth in 4Q24: The analyst expects subdued profit growth in the fourth quarter of FY24, influenced by the base quarter’s one-time PLI gains.
5. Long-Term Growth Drivers Intact: Despite short-term challenges, Britannia’s long-term growth drivers include rising distribution, improving innovation, entry into faster-growing adjacencies, and cost efficiency gains.
6. Valuation and Target Price: The stock is valued at 48x FY26EPS, resulting in a target price of ₹5,157. The recommendation is to ‘Retain Hold.’

Q3 Financial Performance Summary:

• Consolidated revenues grew by 1.4% YoY to ₹42.6bn.
• Gross margins expanded by 21bps YoY to 43.9%.
• EBITDA grew by 0.4% YoY to ₹8.2bn, with margins contracting by -19bps YoY to 19.3%.
• Adjusted PAT grew by 0.8% YoY to ₹5.6bn.

Concall Takeaways:

• Price cuts of ~2/3% were implemented in response to increased competitive intensity and sequential raw material deflation.
• Focus states demonstrated 2.4x growth compared to other states, with market share gains in the Hindi belt.
• Double-digit growth was achieved in International Business Division (IBD), particularly in Nepal and Egypt.
• Rural market expansion continues, though rural remains a concern.
• Inflation cooled faster than anticipated, aiding consumption growth.
• Britannia plans to set up and expand existing capacities in Bihar/UP and has added two lines for Jim Jam to meet rising demand.

This analysis provides investors with insights into Britannia Industries’ recent performance, challenges, and potential growth drivers, aiding in informed investment decisions.

VoM News Desk

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