Shares of Britannia Industries surged 10% to hit a new record high of ₹4,181.40 in intraday on the BSE on Monday, in an otherwise lackluster broader market. The market capitalisation of the food company crossed ₹1 lakh crore amid strong volume trade as 0.83 lakh shares changed hands over the counter as against the two-week average volume of 0.2 lakh stocks.
The FMCG company, a part of the Wadia Group, posted a growth of 28.5% in consolidated net profit to ₹490.58 crore for the September 2022 quarter (Q2 FY23), as against ₹381.84 crore in the corresponding period last fiscal. The consolidated revenue from operations rose 21% to ₹4,379.61 crore from ₹3,607.37 crore.
Boosted by robust Q2 earnings, Britannia share price opened higher at ₹3,935, against Friday’s closing price of ₹3,801.30 on the BSE. During the session so far, the largecap stock rallied as much as 10% to touch a record high of ₹4,181.40, while market capitalisation climbed to ₹1.05 lakh crore.
The Sensex heavyweight has risen 37% from its 52-week low of ₹3,050 touched on March 8, 2022. It has given a return of 11.5% in a year, while it has gained 27.5% in the past six months. The FMCG stock has climbed 9.5% in a month and 9% in a week.
During the quarter under review, Britannia’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) stood at ₹711.7 crore, higher by 27.5% YoY. EBITDA margins expanded to 16.3% from 15.5% in the same quarter last fiscal.
Commenting on Q2 earnings, Varun Berry, Managing Director, said, “We have witnessed positive growth momentum over the last few months. Our go-to-market strategy and increase in distribution reach have converged to deliver a robust topline growth of 22% YoY and 19% QoQ, 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 registers a 15-year high, which is a testimony of our brand strength & team’s execution capability.”
Berry further said that the company’s direct distribution jumped to 26 lakhs outlets, with an addition of 4 lakhs outlets in the last 6 months. “We continue to make strides in our rural journey and we now have appointed around 28,000 Rural Preferred Dealers, which has led to consistent market share gains,” he added.
On cost and profitability, Berry said commodity inflation remained on the boil on the back of rising inflation in flour & milk products, but the company managed to improve its operating margins beyond pre-covid levels, aided by product price hikes and cost efficiency program.
Analysts view on Britannia’s Q2 earnings
Domestic brokerage house ICICI Securities said that Britannia’s volumes, price mix, and revenues growth have surprised consensus positively. The agency has upgraded the stock to “ADD”, from HOLD earlier, with a DCF-based revised target price of ₹4,300, from ₹3,650 earlier. The faster-than-expected revenue growth in core biscuits may boost the stock, while sustained weakness in consumption demand remained a key risk for the company, the agency said in its report.
“We believe amidst a not-so-buoyant demand backdrop, it continues to drive market share gains (15-year high) in weak markets and distribution expansion (rural markets),” it said.
The report also noted that the company redeemed 720 crore of bonus debentures in August this year, while its borrowings have been higher during the first half of the current fiscal. The brokerage has increased its earnings estimates by 12-3% for FY23-24E; modelling revenue and EBITDA CAGR of 13% and 18%, respectively, over FY22-24E.
