Britannia Industries, one of the country’s leading food product companies, has been on a remarkable growth trajectory over the past decade. During this period, the company's share price has soared from around ₹362.10 apiece to ₹4,595.10, clocking an 1169% rise.
In the last one year alone, the stock has risen by 42%, outperforming the Nifty FMCG index by 12.25%, which gained 29.25% in the same period.
During Monday's intraday, the stock rose by 1.60% to register a new record high of ₹4,700 apiece, a day after the company posted excellent performance for Q4FY23, beating street expectations.
The Wadia group company on May 05 reported yet another quarter of stellar numbers, with its net profit growing to ₹558 crore, a significant growth of 47.61% YoY from ₹378 crore in Q4FY22.
Its consolidated revenue from operations during the quarter came in robust at Rs. 3,892 crore, a 11% rise compared to ₹3,508.4 crore in the year-ago period. The cost of raw materials consumed came in lower at ₹2,215.9 crore in Q4FY23 as compared to ₹2,364.7 crore in Q3FY23.
The company's volume growth, however, fell short of analyst expectations, coming in at around 1-2% as opposed to the projected 4%. Analysts have stated this was due to a cut in grammage in key packs.
With RM inflation stabilising, the management expects volume growth to pick up in FY2024. Market share gains, on the other hand, continued in the core biscuits category for the 40th consecutive quarter.
Despite higher employee costs, which jumped nearly 40.52% to ₹170 crore in Q4 FY23, and a 23% YoY rise in other operating expenses to ₹835.8 crore, the company has managed to achieve a 45.69% YoY rise in operating profit.
This was due to a significant jump in other income to ₹130 crore, which included ₹90 crore of benefits received from the PLI scheme for FY2022 and FY2023. While, the operating profit margin improved by 442 bps YoY to 19.9% in Q4. The company had reported an OPM of 19.5% in Q3 FY23.
According to analysts, the robust performance of the company can be attributed to the significant decline in input prices, such as palm oil, laminates, and corrugated boxes, which fell by 14%, 9%, and 16% YoY, respectively. Additionally, the company's cost efficiency measures have resulted in a strong performance in the March quarter.
For the financial year 2022-2023, the company's consolidated revenues grew by 15.3% YoY to Rs. 16,300 crore, the operating profit margin expanded by 180 bps to 17.4%, and profit after tax grew by 28.6% YoY to Rs. 1,951 crore.
Brokerage firms remain optimistic about Britannia's future growth prospects. Axis Securities expects Britannia to deliver market-leading growth from here on as the prices of raw materials have stabilised at current levels, and the rural sector continues to be strong for the company due to its distribution expansion strategy. This is in contrast to other FMCG companies, which are struggling in this segment.
The brokerage estimates revenue, EBITDA, and PAT CAGR of 20% each over FY22–25E and maintained a 'buy' rating on the stock with a revised target price of ₹5,300 apiece. Similarly, Sharekhan also kept its 'buy' tag on the stock with a revised target price of ₹5,500 apiece.
"With sustained market share gains, product launches, and higher traction on new channels (including e-commerce), we expect Britannia’s core biscuit category to beat the industry’s growth in the medium term. The company is going big with the dairy segment, making strong investments on product launches," said Sharekhan.
Phillip Capital also maintained a 'buy' rating on the stock, citing strong 4Q results and a healthy outlook. The brokerage firm has set a target price of ₹5,600 apiece. It believes that the challenges of low-volume growth are likely to fade away as the raw material index cools off, which would further benefit the company's growth prospects.
36 analysts polled by MintGenie on an average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.