Britannia Industries jumps 3{8a924211cc822977802140fcd9ee67aa8e3c0868cac8d22acbf0be98ed6534bd} after Q1 results; should you buy, sell or hold?




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Britannia Industries gained over 3 percent in early trade on Monday after the company reported its earnings for the quarter ended June 2021. The home-grown food company reported a 29 percent decline in consolidated net profit at Rs 387 crore for Q1FY22 as against Rs 543 crore for the same period of the previous fiscal.

Total income during the quarter stood at Rs 3,464 crore, compared to Rs 3,514 crore in the same period of last fiscal. The company posted volume growth of 1 percent as against street estimates of an 8-10 percent decline.

However, high raw material inflation hurt the company’s gross margins.

Read here: Britannia net profit drops 29{8a924211cc822977802140fcd9ee67aa8e3c0868cac8d22acbf0be98ed6534bd} to Rs 387 crore in Q1

During its post-earnings conference call, the management of Britannia Industries said that the company continued to gain market share during the quarter under preview. Its focus states Uttar Pradesh, Rajasthan and others grew 1.33 times the company’s average growth.

“Palm oil inflation was at 49 percent in Q1. The company will continue to drive cost efficiencies and take judicious price increases, to manage profitability. Sales channels grew 12 percent over FY20,” the management siad.

Meanwhile, Britannia’s flat wafers and rolls plant will be operational this quarter, they added.

Here’s what brokerages have to say on Britannia Industries’ stock and Q1 performance:

CLSA

Britannia Industries’ 1QFY22 gross margin contracted more than 300 bps and Ebitda margin over 500 bps, driven by limited price action. We see this margin hit as a strategy to drive growth over a high volume base. Britannia achieved flat sales on a high base in its standalone operations and stood better than our expectations.

With mounting pressure for mass-end players amid the inflationary setting, we see limited pricing to help Britannia gain share. We maintain our Underperform rating and March 23CL target price of Rs 3,625 (45x PE).

Macquarie

The company intends to take price hikes to offset cost pressures. The details on its strategy to offset the input cost pressures are awaited. We look to gain clarity on the competitive situation on the ground, Macquarie said.

The brokerage house maintained a Neutral rating with a target price of Rs 3,600 per share.

Citi

Citi is of the view that the company posted a good operational beat on very low expectations. The EBITDA was ahead of Citi’s/consensus forecasts. It believes that there is room for a relative valuation gap to be bridged.

Citi has a Buy call on the stock and a target price of Rs 3,975 per share.

At 10:20 am, the shares of Britannia Industries were trading 1.54 percent higher at Rs 3,472.85 apiece on the BSE.

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(Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.)



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