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Informist, Friday, Jul 19, 2024

 

By Avishek Rakshit

 

KOLKATA – Higher sales volume may lead to gains in market share and help Britannia Industries Ltd report over 16% year-on-year growth in its consolidated net profit for the June quarter at 5.3 bln rupees, according to the average of the estimates of 12 brokerage firms. The consolidated revenue is expected to rise 4.7% year-on-year to nearly 42 bln rupees.

 

Sequentially, the company's net profit is seen declining 1.4%, and revenue is seen rising 3.2%. The country's largest biscuits maker had posted a net profit of 4.6 bln rupees for the year-ago period and 5.4 bln rupees a quarter ago. It reported revenue of 40.1 bln rupees in the year-ago period, and 40.7 bln rupees in Jan-Mar. The company is yet to announce when it will detail its financial performance for the Apr-Jun period.

 

Among the brokerages, KR Choksey Research estimated the company's net profit the highest at 5.7 bln rupees, and Emkay Global Financial Services Ltd estimated it the lowest at 4.8 bln rupees. KR Choksey Research also estimated Britannia's revenue the highest at over 43 bln rupees, and Incred Research Services Pvt Ltd estimated the lowest revenue of 41.3 bln rupees.

 

In a report, brokerage Nuvama Wealth Management Ltd estimated Britannia’s sales volume to have risen 8%, while Kotak Institutional Equities estimated it marginally lower at 7.5%. HDFC Securities Ltd pegged the volume growth at 7%, and Motilal Oswal Financial Services Ltd estimated it further lower at 5%. The difference in estimates by the brokerages is on account of differences in their sample survey with retailers and sales outlets.

 

The jump in sales volume is not expected to be reflected in the company's revenues jumping significantly. For the past few quarters, Britannia has been telling sector analysts in various conference calls that it is ready to take price cuts and maintain muted pricing to recover market share. Over the years, Britannia, though it maintains market leadership in biscuits, lost market share to regional competition.

 

In the past, sector analysts had presumed that local or regional competition would phase out after commodity prices start inching up as regional companies face a cash flow crunch. However, regional competition remains strong despite the rise in costs. For instance, SAJ Food Products Pvt Ltd in east India wrestled significant market share from Britannia in the past and continues to maintain its hold on the market.

 

It was on account of such instances that Britannia told analysts that it would focus on expanding its current market share and might resort to competitive pricing if need be.

 

Following the guidance from the company, Kotak Institutional Equities said that Britannia's price mix declined 3% year-on-year in Apr-Jun, as was the case in Jan-Mar, amid price cuts and heightened local competition. Nuvama Wealth Management said it expects negative pricing of 4% on Britannia, and some adverse impact in the biscuits segment due to a harsh summer. The brokerage noted that many consumers ate biscuits with hot tea and coffee.

 

Britannia is expected to report 7.8 bln rupees of earnings before interest, tax, depreciation, and amortisation, according to the average of the estimates from 11 brokerages. The EBITDA is expected to be in a range of 7.2-8.2 bln rupees.

 

Kotak Institutional Equities said that it expects Britannia's gross margins to contract by 65 basis points sequentially to 44.3% as price cuts and higher grammage sales may offset the impact of soft raw material prices, except of wheat. However, on a year-on-year basis, Motilal Oswal Financial Services expects the gross margin to expand by 160 basis points to 43.5%. Nuvama Wealth Management said that the gross margin might increase by 294 basis points to 44.3%.

 

Britannia's EBITDA margins are estimated by Motilal Oswal Financial Services and Nuvama Wealth Management to rise to 18.6%, an increase of 141 basis points.

 

At 1015 IST, shares of Britannia Industries were up 1% at 5,929.75 rupees on the National Stock Exchange.

 

Following are the Apr-Jun earnings estimates of Britannia Industries based on reports compiled by Informist from 12 brokerage houses:

 

Brokerage firm	Net sales (in mln rupees)	Net profit (in mln rupees)	EBITDA (in mln rupees)
Axis Securities Ltd	42,020.00	5,310.00	7,780.00
Emkay Global Financial Services Ltd	41,886.00	4,768.00	7,204.00
HDFC Securities Ltd	41,588.00	5,327.00	7,732.00
Incred Research Services Pvt Ltd	41,297.00	5,245.00	7,789.00
Kotak Institutional Equities	42,098.00	5,384.00	7,769.00
KR Choksey Research	43,029.00	5,672.00	8,160.00
Motilal Oswal Financial Services Ltd	42,283.00	5,307.00	7,847.00
Nirmal Bang Equities Pvt Ltd	41,992.00	5,620.00	8,062.00
Nuvama Wealth Management Ltd	41,525.00	5,253.00	7,717.00
Prabhudas Lilladher Pvt Ltd	42,594.00	5,230.00	7,795.00
Sharekhan Ltd	41,600.00	5,150.00
YES Securities (India) Ltd	42,072.00	5,442.00	7,994.00
Average	41,998.67	5,309.00	7,804.45

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Avishek Dutta

 

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