Britannia Industries stock surged nearly 6 per cent to Rs 3,298 apiece on the BSE on Wednesday after the company on Monday posted a profit before tax (PBT) of Rs 498 crore for the second quarter ended September 30, 2019 (Q2FY19), up 8.5 per cent when compared with the corresponding period of the previous fiscal.
The net profit for the period grew 33 per cent to Rs 403 crore on a yoy basis on account of re-measurement of deferred tax in accordance with lower corporate tax rate. It reported a consolidated revenue growth of 6 per cent for the quarter at Rs 3,049 crore on YoY basis, in line with industry estimates.
"During this phase of sluggish demand, we continued to invest in enhancing our brand equity through focused product campaigns. This is on the belief that the recent measures announced by the government will kick start the economy and boost consumer demand as we move forward," said Varun Berry, Managing Director at the company.
On the cost front, Britannia witnessed moderate inflation in the prices of key raw materials for the bakery business while there was an inordinate increase in milk prices which impacted its dairy business. "We, however, accelerated the drive on cost efficiencies & leveraged fixed costs which helped us improve the shape of our business and deliver highest ever operating profits in the Quarter," Berry added.
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Analysts at ICICI Securities note that volume growth of 3 per cent in the quarter under review continued the subdued performance from the first quarter. They believe that apart from "rural slowdown" narrative, Britannia’s performance has also been impacted by the improvement in growth by regional players, pointing towards an end of easy market share gains (in North and East India) and therefore a muted medium-term.
However, recent launches in premium biscuits and geographical expansion of adjacent products can somewhat mitigate this challenge, they wrote. The brokerage has maintained 'REDUCE' rating on the stock with DCF-based target price unchanged at Rs 2,700. At their target price, the stock will trade at 34x Sep’21E.
At 10:10 am, the stock was trading over 5.50 per cent higher at Rs 3,288.60 apiece on the BSE against a 0.03 per cent rise in the S&P BSE Sensex. Shares of Britannia had hit a 52-week high of Rs 3,443.90 on September 23.