Earnings Outlook
Volume growth to drive Jul-Sept consol PAT for Britannia
This story was originally published at 16:22 IST on 18 October 2024
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By Avishek Rakshit
KOLKATA – An increase in sales volume leading to Britannia Industries Ltd expanding its market share is expected to help the country's largest biscuits maker to report a consolidated net profit of INR 6.3 billion during Jul-Sept, up 7.6% on year, according to an average of estimates from 13 brokerages. The company is expected to report a consolidated revenue of INR 47.6 billion, up 7.4% on year, the estimates showed.
Sequentially, the consolidated net profit is seen rising 25%, and revenue 12.0%. The company had reported a net profit of INR 5.9 billion in the year-ago period and INR 5.1 billion during Apr-Jun. Its revenues were INR 44.3 billion in the year-ago period and INR 42.5 billion in the June quarter.
The company is yet to announce the date for declaring its financial results for Jul-Sept.
Among the 13 brokerages, Elara Securities (India) Pvt. Ltd. has the highest projection for net profit at INR 6.7 billion and Nuvama Wealth Management Ltd. has the lowest at INR 5.8 billion. The estimates for revenue range from INR 46.2 billion by HDFC Securities Ltd. to INR 49.4 billion by KR Choksey Research.
In a report, brokerage Motilal Oswal Financial Services said that Britannia's sales volume could increase 9% on year, leading to its revenues surging 7%. Other brokerages, including Kotak Institutional Equities and Nuvama Wealth Management, pegged the volume growth at near similar levels. However, the revenue growth is expected to trail the volume growth. HDFC Securities reasoned that the volume growth could be on account of grammage increase. Usually, companies increase the grammage instead of reducing prices to either pass on cost benefits to consumers, or stay competitive in the market. Thus, the change in sales volume is not proportional to an increase in revenue even though sales mix remains constant.
For the past few quarters, Britannia has been maintaining that it is prioritising revenue growth and gaining of market share over other financial parameters. Its narrative to sector analysts has been that the company is ready to take price cuts and maintain muted pricing to recover its market share in prime territories, and gain market share in new areas of operation. Although Britannia maintained its market dominance in the organised biscuits industry, it lost some market share to regional competition in some areas which it is aggressively aiming to recover.
In the past, sector analysts had presumed that local or regional competition would phase out after commodity prices start inching up as regional companies would face a cash flow crunch. However, regional competition still remains strong despite cost pressures. 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.
However, Motilal Oswal Financial Services is of the view that since Britannia did not raise prices in the last 7-8 months despite cost pressures, the company may now hike prices in Oct-Mar due to cost pressures.
Kotak Institutional Equities is of the view that Britannia's consolidated gross margins could fall by 80 basis points sequentially to 42.6%, on account of rising costs of palm oil – a key ingredient for nearly all major foods companies. Nuvama Wealth Management projected gross margins to decline 7 basis points on year at 42%, and operating margins to shrink 173 bps at 18%.
Britannia is expected to report earnings before interest, tax, depreciation, and amortisation, or EBITDA, of INR 9.0 billion, according to the average of estimates from 12 brokerages. The estimates on EBITDA range from INR 8.4 billion by Nuvama Wealth Management and INR 9.4 billion by KR Choksey Research.
Following are the Jul-Sept earnings estimates of Britannia Industries based on reports compiled by Informist from 13 brokerage houses:
|
Broker Name |
Net Sales (in INR million) |
Net Profit (in INR million) |
EBITDA (in INR million) |
|
Axis Securities Ltd |
46,680.00 |
6,290.00 |
9,050.00 |
|
Centrum Broking Ltd |
48,288.00 |
6,332.00 |
9,037.00 |
|
Elara Securities (India) Pvt Ltd |
48,109.00 |
6,687.00 |
9,336.00 |
|
Emkay Global Financial Services Ltd |
47,664.00 |
6,511.00 |
9,390.00 |
|
HDFC Securities Ltd |
46,152.00 |
6,322.00 |
9,034.00 |
|
Kotak Institutional Equities |
47,438.00 |
6,015.00 |
8,528.00 |
|
KR Choksey Research |
49,360.00 |
6,387.00 |
9,438.00 |
|
Motilal Oswal Financial Services Ltd |
47,389.00 |
6,508.00 |
9,320.00 |
|
Nirmal Bang Equities Pvt Ltd |
46,989.00 |
5,924.00 |
8,505.00 |
|
Nuvama Wealth Management Ltd |
46,977.00 |
5,838.00 |
8,433.00 |
|
Prabhudas Lilladher Pvt Ltd |
48,318.00 |
6,398.00 |
9,035.00 |
|
Sharekhan Ltd |
47,600.00 |
6,360.00 |
|
|
YES Securities (India) Ltd |
47,933.00 |
6,595.00 |
9,347.00 |
|
Average |
47,607.46 |
6,320.54 |
9,037.75 |
At 1423 IST, shares of Britannia traded 1.7% down at INR 5,886.8 on the National Stock Exchange. End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Tanima Banerjee
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