FMCG giant Britannia Industries may have missed Street estimates on margins in the June quarter, but analysts believe investors should pay closer attention to where the company exited the quarter rather than where it began.
Margins may have disappointed in the June quarter, but brokerages believe the bigger takeaway was management's commentary on growth.
With Britannia exiting the quarter at a mid-teens revenue growth run-rate and demand showing signs of improvement, the debate is now centred on whether earnings growth can accelerate as volumes recover.
ALSO READ: Britannia Industries Q1 Results: Profit Rises 13%, Revenue Hits Rs 5,000 Crore
What Did Brokerages' Say?
Morgan Stanley
- Maintained Equal-weight with a target price of Rs 5,848.
- Said most key categories improved growth sequentially.
- Highlighted that Britannia exited the quarter with mid-teens revenue growth.
- Said the margin miss was offset by encouraging commentary on improving demand.
Goldman Sachs
- Maintained Neutral with a target price of Rs 6,000.
- Described the quarter as broadly in line.
- Said the company's growth trajectory improved meaningfully towards the end of the quarter.
JPMorgan
- Maintained Neutral with a target price of Rs 5,900.
- Said revenue growth improved despite a margin miss.
- Flagged input-cost volatility as the key monitorable over the coming quarters.
Macquarie
- Maintained Underperform with a target price of Rs 4,800.
- Highlighted the company's exit run-rate of mid-teens sales growth.
- Liked management's comments on improving domestic demand and market-share gains against competition.
Britannia's Q1 Performance
Britannia reported a 13.4% year-on-year rise in consolidated net profit to Rs 591 crore, while revenue increased 8.2% to Rs 5,000 crore, broadly matching Street estimates.
Operating performance was comparatively softer. EBITDA rose 11% to Rs 840 crore, while EBITDA margin expanded to 16.8% from 16.4% a year earlier but remained below analysts' expectations as higher other expenses weighed on profitability.
Management said the business exited the quarter with mid-teens revenue growth, significantly stronger than the reported quarterly growth rate of 9.5%, while international operations also recovered sequentially.
For the Street, that improving exit momentum has emerged as the bigger takeaway.
Although margin pressures and input-cost volatility remain key watchpoints, brokerages increasingly believe the pace of demand recovery, and whether Britannia can sustain its market-share gains, will be the primary driver of the stock over the next few quarters.
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