Analysts divided on biscuit maker amid intensifying competition, rising finance costs

Britannia shares were under pressure on Monday after the FMCG major reported a mixed set of quarterly numbers amid intensifying competition owing to easing commodity prices. The stock of Britannia — whose popular brands include Tiger, Bourbon, Milk Bikis and Marie Gold — dropped by as much as Rs 123.3 or 2.6 per cent to Rs 4,675 apiece on BSE, moving further away from 52-week highs touched last month. 

Britannia Q1 results

After market hours on Friday, Britannia reported a net profit of Rs 455 crore for the quarter ended June 30, translating to a year-on-year increase of 35.4 per cent. 

Its revenue came in at Rs 4,011 crore for the three-month period as against Rs 3,701 crore for the corresponding period a year ago, according to a regulatory filing.  

The FMCG company reported a 37.3 per cent increase in earnings before interest, taxes, depreciation and ammortisation (EBITDA) to Rs 689 crore. 

Its margin — a key measure of profitability — improved by 360 basis points to 17.2 per cent for the June quarter.

While the company's profit, revenue and EBITDA missed analysts' estimates, its margin was in line with the projections. 

According to Zee Business research, Britannia was estimated to report a quarterly net profit of Rs 511 crore, revenue of Rs 4,088 crore, EBITDA of Rs 685 crore and margin of 17 per cent.

The company's volume growth remained flat compared with the year-ago period, in contrast to Zee Business analysts' estimate of six per cent growth. 

What to do with Britannia shares?

Zee Business analyst Varun Dubey recommends selling Britannia futures for a target price of Rs 4,650 with a stop loss at Rs 4,890.

Morgan Stanley, whose target price suggests an upside of eight per cent in Britannia shares, maintained an 'overweight' rating on Britannia after the earnings announcement. The brokerage said the FMCG company's net profit fell short of estimates due to higher-than-expected depreciation and finance costs.  

Macquarie kept a 'neutral' call on Britannia with a target price of Rs 4,450.  

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