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Axis Securities Report
Britannia Industries Ltd.'s revenue grew 11% YoY (~1% volume growth), which was a shade below our estimates. It continues to gain market share and enjoys strong traction in core and new product development on the back of distribution expansion.
The company's gross margins were far ahead of estimates and stood at 43.1% (up 577 basis points YoY), which was on account of lower input costs – softer palm oil and packing material prices, though wheat and sugar remained firm. Subsequently, Ebitda grew 46% YoY while margins stood at 20.6% (up 491 bps YoY) led by better-than-expected gross margins and higher other operating income (production linked incentive – for FY22 and FY23).
The management highlighted that the gross margins going ahead are likely to expand on the back of improved efficiency and strategic advantage in terms of raw material procurement as it has already covered some of the key raw materials for FY24.
Britannia Industries' profit after tax stood at Rs 559 crore, up 47% YoY.
Outlook:
We expect Britannia to deliver market-leading growth from here on as-Raw material prices, while still firm, have or will stabilise at the current levels, rural continuing to remain stronger for Britannia (due to strong distribution expansion strategy in rural) despite other fast moving consumer goods companies struggling in this section.
Furthermore, the rural revival is expected to recover the fmcg sector in FY24 with government spending and increased urban remittances. Britannia Industries' own initiatives such as robust portfolio planning through NPD in core and adjacencies, continued focus on increasing direct reach and increasing rural penetration, increasing share of in-house manufacturing and thereby improving overall efficiency will make Britannia Industries stronger in the longer run.
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