Britannia shares rally 4% on Q2 profit beat: Should you buy, sell or hold?

Shares of the country’s leading biscuit maker Britannia Industries on Thursday (November 2) after a strong start, rallied as much as 3.82 per cent, hitting day’s high price of Rs 4569.05 apiece on the BSE. The gains in the stock were triggered after its Q2 results came in better-than-estimates.

For the July-September quarter, the company posted consolidated net profit of Rs  586.50 crore versus Zee Business research estimate of Rs 526 crore. The company’s profit stood at Rs 490.58 crore in the corresponding quarter a year ago, Britannia Industries said in a BSE filing.

The topline, however, was below estimates at Rs 4,432.88 crore, up 1.21 per cent year-on-year (YoY). Zee Business analysts estimated the biscuit maker's revenue for the quarter under review to come in at Rs 4,517 crore, a 3 per cent year-on-year rise amid softening input costs. 

Net sales at the Marie Gold biscuit-maker were marginally up to Rs 4,370.47 crore during the quarter under review as against Rs 4,337.59 crore in the year-ago period.

While the sales growth over last year is 1 per cent, the 24-month growth is 23 per cent," said an earnings statement from Britannia Industries.

The company also expanded its rural distribution network, with a high potential in rural growth despite slowdown.

Should you buy, sell or hold Britannia after September results?

Global brokerage maintains an overweight rating on the Britannia stock with a target price of Rs 5013. For the brokerage, the company’s revenue during the period under review was up 10 per cent on a 4-year CAGR basis. Gross margin scaled higher by 373 bps YoY and 73 bps sequentially to 42.1 per cent, resulting in EBITDA margin expansion to 20 per cent. 

Nomura maintained its ‘buy’ rating on the biscuit-maker with a target price of Rs 5500, suggesting the stock has the potential to rally 25 per cent from the last close. The brokerage noted that despite demand continuing to be challenging in the Q2 period, the company continued to post strong margins. It further highlighted that price-cut aided market share recovery in some key brands and stock-keeping units (SKUs).