Britannia Q1 Results Review - Improving Volume Trajectory; Miss On Ebitda: Motilal Oswal

Motilal Oswal Report

Britannia Industries Ltd. posted revenue growth of 4% YoY in Q1 FY25 (estimate 5%) and volume growth of 8%. Price actions continued to affect value growth for the company. Other operating income surged 195%, mainly due to the incentive received from the Ranjangaon plant, which qualified as an ultra-mega plant this year.

Non-biscuit portfolio (rusk, cake, bread, etc.) remained the key growth driver and contributed 25% to total revenue. Rusk delivered double-digit volume growth, while cheese posted double-digit revenue growth. The management remains positive about the growth outlook of its non-biscuit portfolio and expects it to sustain outperformance by 1.5 times versus the biscuit portfolio.

Gross margin expanded by 150 basis points YoY to 43.4%. Ebitda margin improved 50 bp YoY to 17.7% (estimate: 18.6%). Ebitda increased 9% YoY (estimate: 14%). We estimate Ebitda margin of 19-19.5% for FY25/FY26 (versus 18.9% in FY24).

The management has guided for double-digit volume growth in H2 FY25, along with price hikes. Volume is witnessing healthy improvement, which is expected to continue in the coming quarters. Operating margin is key monitorable, which missed out in Q1 to drive volumes. We reiterate our Neutral with a target price of Rs 5,850 (premised on 50 times June-26E earnings per share).

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