Street looks to Britannia for pleasing numbers

Most brokerages and analysts tracking the firm have good expectations and have a 'Buy' rating on its shares

After the disappointing numbers from consumer goods majors Hindustan Unilever and ITC for the December quarter, third in the financial year, the Street is expecting a better show from Britannia Industries. According to BSE the company is to declare the results on Tuesday,

Most brokerages and analysts tracking the company have good expectations and have a ‘Buy’ rating for its shares. They expect sales at Rs 1,980-2,026 crore, growth of 11-13 per cent over a year before.

Kotak Institutional Equities has estimated the net sales and adjusted profit at Rs 2,025 crore and Rs 151 crore, respectively, a growth of 13 per cent and 50 per cent.

"We model consolidated revenue growth of 13 per cent year on year, led by six per cent domestic volume growth and around seven per cent price/mix-led growth," it said. Kotak has estimated Ebitda (earnings before interest, taxes, depreciation and amortisation) at Rs 233.6 crore, growth of 46 per cent over the Rs 159.8 crore a year before. The Ebitda margin is pegged at 11.5 per cent, an addition of 260 basis points (bps).

Another brokerage expects 25.2 per cent growth in profit after tax (PAT) at Rs 126 crore on a consolidated basis and 13 per cent growth in top line at Rs 2,026 crore. The Ebitda margin is estimated at 9.7 per cent and gross margins are estimated to grow by 71 bps. In absolute terms, Ebitda is estimated between Rs 198 crore and Rs 218 crore, growth of 23.6 per cent, said an analyst who did not want to be named.

He believes the key difference is in advertising and promotion spending. This was 7.3 per cent of sales in the July-September quarter, among the lowest in any single quarter in the past five to six years.

Traditionally, the third quarter witnesses higher expenditure on this head, since it is the festive quarter.

“We believe advertising and promotion spend should have been at least 8.5 per cent,” said an analyst.

During the December quarter, Britannia launched Nutrichoice Heavens and Good Day Chunkies, new brands of premium cookies. “We believe a lot expense will be built in first and then there will be a reward, if any, over the medium to long-term period. Even in Q4, there will be substantial cost coming from the Filmfare award, where Britannia is the title sponsor,” said the analyst. It is also likely to spend heavily on the Cricket World Cup in February and March, he added.

”If they reach anywhere close to my numbers, the Street will be disappointed because my Ebitda and PAT numbers are 10 per cent lower than the Street expectations. If they reach the Street numbers, the stock will do well,” he explained. Adding that advertising spending could be about Rs 170 crore and could go much higher in the fourth quarter.

For the full year, on a consolidated basis, the top line for the full year (2014-15) is likely to reach Rs 7,800 crore, growth of 13.4 per cent over FY14. On the profit front, Rs 514 crore before extraordinary items, 30 per cent growth over the previous year.