Q4 impact: Britannia stock up 10%, logs sharpest intraday gain in 18 months

Britannia stock update: Upbeat outlook, healthy dividend triggers sharp rally in Britannia stock. Here's what bokerages say post Britannia's Q4 results.

Shares of Britannia Industries surged nearly 10 per cent to Rs 5,199.60, its sharpest intra-day rally in past 18 months, on the BSE in Monday’s intra-day trade on expectations of improvement in outlook. Further, the company's board has recommended the final dividend for the financial year ended March 31, 2024 (FY24) @ 7350 per cent i.e., Rs 73.5 per equity shares of Re 1 each.

The stock of packaged foods company recorded its sharpest intra-day surge since November 2022, when it rallied 10.2 per cent. At 11:51 am; Britannia was quoting 8 per cent higher at Rs 5,116, as compared to 0.25 per cent rise in the S&P BSE Sensex. The stock had hit a 52-week high of Rs 5,386.25 on December 29, 2023.

While, announcing March quarter (Q4FY24) earnings on Friday, after market hours, the management said the company’s market share rebounded as the year progressed as a result of strategic pricing actions to maintain competitiveness and intensified investments in brands, supported by distribution expansion.

Britannia significantly expanded its distribution network, reaching approximately 2.79 million outlets directly and added around 2,000 rural distributors over the past year. The management said the company will continue to invest behind brands and stay price competitive with a clear objective of driving market share while sustaining profits.

Britannia is focusing on driving volume growth and gaining market share through a combination of maintaining competitiveness in the market, launching innovative products, focusing on the non-biscuit categories, and tapping the potential for further distribution expansion. The management believes that the EBITDA margin has likely peaked as it will invest in brand building and engage in competitive pricing/ promotional offers to combat the competitive pressures.

Analysts at KRChoksey Shares and Securities believe Britannia will see high single-digit/ low double-digit revenue growth in FY25E/ FY26E led by easing macro environment and demand conditions, innovation, premiumization, increasing penetration in the Hindi belt and rural India and focus on the non-biscuit adjacent categories. The brokerage firm expect margins to remain healthy and range-bound driven by operating efficiencies, premiumization and cost rationalization which will largely offset the brand investments and price cuts taken to combat competitive pressure.

Meanwhile, rural demand which has been a laggard for fast moving consumer goods (FMCG) industry is expected to revive in FY25 on the onset of likely strong monsoon. Analysts at Nuvama Institutional Equities expect Britannia to be a beneficiary of this revival. Further, a good wheat crop output will aid margins.

Britannia continues to stay vigilant of the commodity prices & evolving geopolitical landscape. Its cost efficiency program continues to yield operational savings of ~2 per cent of revenues, ensuring healthy operating margins, the brokerage firm said with maintain ‘hold’ rating on the stock and target price of Rs 5,395 per share.

Britannia’s Q4FY24 revenue growth of ~3 per cent YoY was largely volume-led (~6 per cent YoY), though its trajectory largely remained similar in the context of current demand and competitive environment. Return of market share gain trajectory despite resurgence of competition and continued outperformance in focus states are key positives led by continued distribution expansion and increased brand investments, analysts at ICICI Securities said.

Margins continue to be significantly elevated vs historical levels with gross margin being largely similar YoY at ~45 per cent while EBITDA margin corrected marginally to 19.4 per cent due to increased ad-spends. It continues to drive distribution expansion and strong performance in rural markets and focus states, with focus on driving market share gains while maintaining profitability. That said, material success of (at least a few) new segments and ramp-up of adjacent categories is imperative, the brokerage firm said in result update. The stock however, trading above brokerage firm’s target price of Rs 5,100 per share.