Britannia’s near-term prospects not upbeat despite poor Q1 performance

Gross margin and Ebitda margin both fell to several quarterly lows. Consolidated gross margin fell 182 basis points (bps) year-on-year (y-o-y) to 36.9%. The company said items related to the bakery business such as wheat and industrial fuels saw 15-20% sequential inflation in Q1. The contraction in Ebitda margin was sharp as other expenses increased sharply. Accordingly, Ebitda margin fell 274 bps year-on-year to 13.5%. Result: Q1 EBITDA was around 501 crore, almost 10% less. This comes at a time when total operating revenue has grown by about 9%.

Britannia launched innovations like Biscaf, Bourbon Vanilla Cheesecake, NutriChoice Seeds & Herbs in the last quarter. It also launched croissants nationally and introduced treat cheese wafers. Investors would do well to closely track the success of the new segment. Nomura Financial Advisory & Securities (India) in its August 5 report said, “While we want Britannia to drive innovation to fuel its next phase of growth, it is still some time before we see a meaningful improvement in its growth trajectory. is far.”

Britannia has told analysts that it will hike cumulative prices by 6-7% for the half-year ending September (H1FY23) to tide over the increased cost. Analysts at Jefferies India said in an August 5 report, “A correction from extremes in some key input prices should be helped and may see a strong bounce in margins.” and margin together in the immediate future. Nomura expects near-term volumes to remain capped due to higher price increases and impact on consumer wallets.

Meanwhile, Britannia shares have recovered significantly from their 52-week low 3,050 was seen on the NSE on March 8, up 21%. Analysts said valuations are not cheap at all in the backdrop of weak earnings prospects in the near-to-medium term. Based on data from Bloomberg, the stock trades at about 43 times estimated earnings for FY24.

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