Britannia surges 9% on healthy Q2, market cap hits Rs 1 lakh crore; should you buy, sell or hold?

The company’s consolidated revenue from operations jumped 21 percent YoY to Rs 4,379.61 crore from Rs 3,607.37 crore, while EBITDA for the quarter came in at Rs 711.7 crore, higher by 27.5 percent YoY.

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 Britannia Industries‘ share price surged over 9 percent in the morning trade on November 7 after the FMCG major posted a 28 percent year-on-year growth in consolidated net profit at Rs 490 crore for the September quarter, way above analysts’ expectation of Rs 451 crore.

The share surge boosted the company’s market cap to Rs 1 lakh crore.

The company’s consolidated revenue from operations jumped 21 percent YoY to Rs 4,379.61 crore from Rs 3,607.37 crore, the firm said on November 4.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the quarter came in at Rs 711.7 crore, higher by 27.5 percent YoY. EBITDA margins expanded to 16.3 percent against 15.5 percent in the year-ago quarter. Analysts had expected margins to contract due to high-cost inventory.

At 9.30 am, Britannia Industries was quoting at Rs 4,175.90, up Rs 374.60, or 9.85 percent, on BSE. It touched an intraday high of Rs 4,178.25, also its 52-week high, and an intraday low of Rs 3,935.

It was trading with volumes of 34,072 shares, compared to its five-day average of 14,101 shares, an increase of 141.64 percent.

Also read: Foreign investors pick up Indian equities worth $3 billion in last 10 sessions

“Our go-to-market strategy and increase in distribution reach have converged to deliver a robust topline growth, aided by a mid-single-digit volume growth, as we record our highest quarterly revenue. We continue to have aggressive market share gains, consistently over the past 38 quarters and registered a 15-year high,” managing director Varun Berry said.

On cost and profitability front, commodity inflation remained on the boil on the back of rising inflation in flour and milk products. As a result of pricing actions and intensified cost efficiency programme, the company was able to improve our operating margins beyond pre-COVID levels, Berry said.

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Here’s what global brokerages have to say about the stock after Q2 results:

Japanese brokerage firm Nomura has upgraded the stock to “buy” with the target at Rs 4,600 a share, an upside of 10 percent from the current market price. The research firm believes that the Q2 results were an all-round beat with higher-than-peers volume growth, a CNBC-TV18 report said.

“The firm is demonstrating strong pricing power/brand strength in a challenging environment with heightened innovation, new launches seeing significant sales shift. We have increased FY23F/24F/25F EPS by 4%/7%/10%,” it added.

Macquarie has a neutral call on the stock with the target at Rs 3,750 per share. It is of the view that Q2 EBITDA was better than expected with a rise in net debt, which would fund the dividend payout. “Input cost pressures is a concern,” it said.

Goldman Sachs also has a neutral call, with the target at Rs 4,000 a share. It feels that the large beat in Q2 was driven by the acceleration in revenue growth to 21 percent YoY, while large price increases did not cause any slowdown in volume.

“Distribution expansion and market share gains are the key drivers for revenue growth. EBITDA margin also recovered more than expected,” it added.

CLSA, however, has an “underperform” call on the FMCG stock with the target at Rs 3,890. The firm gained market share for 38 quarters, with the share now at a 15-year high.  “Growth was price-led, where volume growth was in mid-single digits. Higher pricing aided a gross margin recovery,” it said.

Morgan Stanley has an “overweight” call on Britannia Industries with target at Rs 3,892. The company posted strong Q2 and strong commentary with the firm seeing positive growth momentum in the last few months, it said.

Also read: FMCG firms expect margins to improve as inflation eases

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