Although volumes got here off q-o-q because of decide up in out-of-home consumption, they had been nonetheless strong at 9% y-o-y on a base of three% y-o-y.
Britannia Industries’ Q2FY21 income (up 12.1% y-o-y ) and adjusted PAT (up 22.8% y-o-y ) got here in line, whereas Ebitda (up 37.2% y-o-y) surpassed our estimate. Although volumes got here off q-o-q because of decide up in out-of-home consumption, they had been nonetheless strong at 9% y-o-y on a base of three% y-o-y. Regardless of average inflationary strain within the uncooked materials basket, combine enchancment drove 176bps y-o-y gross margin enlargement. Price optimisation and effectivity advantages drove 361bps y-o-y Ebitda margin enlargement.
With adjacencies doing effectively, Britannia’s journey in the direction of changing into a complete meals firm continues to realize heft, in our view. Retain Purchase with TP of Rs 4,345.
Biscuit progress normalises After a robust Q1FY21, quantity progress got here off q-o-q from 21.5% y-o-y to 9% y-o-y in Q2FY21 reaffirming our thesis—biscuits progress will normalise as out-of-home consumption recovers. Adjoining companies continued to ship wholesome progress. Rusk surpassed total progress. Bread’s profitability improved considerably. In dairy, cheese led progress for second straight quarter; nevertheless, drinks portfolio continued to be impacted.
ICD, presently at Rs 7 bn, is broadly on the similar degree as FY20 finish. On the steadiness sheet entrance, Britannia’s short-term borrowings doubled because of working capital wants and bonus debenture concern. To satisfy future demand, the corporate is planning funding in three greenfield services (Tamil Nadu, UP, Bihar) and two brownfield services (Odisha, Ranjangaon).
Q2FY21 convention name: Key takeaways New merchandise contributed 4% to income in Q2FY21. 25% of income got here from non-biscuit portfolio. Whereas conventional commerce progress remained sturdy, fashionable commerce (10% of income) was slower. The corporate posted double-digit progress in July, low single-digit progress in August and good progress (excessive single digit) in September.
Outlook: Going sturdy A strong product pipeline, entry in new classes & geographies and deepening attain will assist Britannia maintain its outperformance. We keep ‘BUY/ SO’ with TP of Rs 4,345 and proceed to maintain it amongst our prime picks. The inventory is buying and selling at 52.1x FY22e EPS.
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