Britannia Q4 results cheer the investors: What should you do with the stock?

Following Britannia Industries Ltd Q4FY23 earnings shares of the fast moving consumer goods (FMCG) on Monday touched a new 52-week high. The company on Friday, reported a 47% on year jump in its consolidated net profit for Q4FY23.

According to the company, the consolidated net profit for FY23 climbed year over year (YoY) by 52.3% to ₹2,322 crore. Revenue from operations  increased by 15.3% on year to ₹16,300.55 crore.

Only volume growth, which was expected to be between 3% and 4% but actually came to 1% to 2%, fell short of street expectations.

Global brokerage house JP Morgan has maintained a ‘neutral’ rating on the stock, while Morgan Stanley has recommended a ‘buy’ rating. Let’s look at what domestic brokerages have to say about the stock.

Philip Capital

According to the brokerage house, the stock is a preferred play on India’s food story. The brokerage firm continues to support management’s strategy of strengthening power brands through innovation, re-launches, and premiumisation, improving direct reach, raising the share of in-house manufacturing, and concentrating on new categories and adjancies to drive top line and bottom line growth.

“We have upgraded our earnings per share (EPS) estimates by 4-5% each for FY24-25 owing to strong 4Q results coupled with healthy outlook and maintain. Britannia as High conviction ‘buy’ with target price of ₹5,600 as challenges of low volume growth is likely to fade away as RM index cools off . In our view, investors with long term bias and patience will be highly rewarded,” said the brokerage.

Sharekhan by BNP Paribas

The brokerage stated in its research report that the company, despite unpredictable commodity prices, reported yet another quarter of exceptional results in Q4FY2023, surpassing both its own and the market’s expectations.

The brokerage has maintained ‘buy’ rating with a revised target price of ₹5,500.

“Britannia has widened the gap with the No. 2 player in the biscuits category and is focusing on becoming a formidable player in bakery and dairy business by adding capacities in key markets. With sustained market share gains, product launches, and higher traction on new channels, we expect Britannia’s core biscuit category to beat the industry’s growth in the medium term. The company is going big with the dairy segment, making strong investments on product launches. This along with scale-up in revenue of the adjacent categories and efficiencies would help Britannia achieve double-digit earnings growth of 17% over FY2023-FY2025E,” said the brokerage.

Nuvama Institutional Equities

The company’s Q4FY23 revenue (up 13.3% YoY), EBITDA (up 45.7% YoY), and PAT (increased 47.8% YoY) exceeded the brokerage’s expectations. Despite the fluctuating demand, the company had volume growth of 2% to 3% YoY and posted its highest-ever EBITDA margins of 19.9%. With its solid foundation, the company keeps increasing the market share gap over its biggest rival in industries including croissants, dairy, and bread.

“Britannia continues to focus on driving product portfolio expansion as well as scaling up distribution to drive growth. It remains one of our top picks. We upgrade FY24E/FY25E EPS 3.4%/5.3% to arrive at a target price of ₹,940 (earlier ₹5,640). Maintain ‘BUY/SO’,” said the brokerage.

Kotak Institutional Equities

The company reported a 13%–46% yoy increase in revenue and EBITDA, driven by robust topline growth, margin expansion, and some help from a PLI incentive from a former period. The company is in a good position to provide strong or resilient volume growth, supported by ongoing biscuit share gains and pressure on adjacent markets. The stock has been given the brokerage’s ‘add’ rating recommendation.

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