Better than expected margins offset the miss on topline growth; valuations relatively comfortable now
- Result summary - Overall performance ahead of estimates as better than expected margins offset the miss on topline growth; revenue/EBITDA/PAT growth of 12%/37%/23% respectively.
- Topline - Revenue growth of 12% yoy (around 9% volume growth) to Rs 34.2bn, a slightly higher than expected decline in growth trajectory from 27% growth witnessed in 1Q.
- Margins - Gross margins improved 230bps yoy given moderate RM inflation and a better mix while EBITDA margins saw a sharper 370bps increase to 19.8% given continued benefits of efficiency gains across supply chain, wastages and fixed costs.
- Earnings - PAT growth of 23% was lower than EBITDA growth of 37% owing to higher tax rate and higher interest expenses on the bonus debentures issued recently.
- Key operational highlights - Full range of products back in market, increased focus on distribution efficiency, reduced distributor inventory and moved closer to a normal A&P spend environment.
- Adjacent business update - All adjacent businesses also delivered healthy and profitable growth.
- Input cost outlook - Expect stable input prices going ahead given good monsoons and harvest.
- View - We maintain our neutral stance on the stock for now and will revisit our estimates post the earnings call. While higher than industry growth prospects in the current environment given affordability and aggressive innovation and ramp-up in direct distribution are key positives, limited success in non-biscuit segments and risks to current level of margins offset the positives to a large extent. Recent underperformance though has brought down valuations to 40x FY23E earnings, which can drive some upside in the near-term.
Shares of BRITANNIA INDUSTRIES LTD. was last trading in BSE at Rs.3773.8 as compared to the previous close of Rs. 3747.55. The total number of shares traded during the day was 16654 in over 2838 trades.
The stock hit an intraday high of Rs. 3795 and intraday low of 3744.2. The net turnover during the day was Rs. 62864724.