Britannia Q2 preview: High demand for biscuits to lead to double-digit sales growth

NEW DELHI: Britannia Industries is likely to continue its stellar performance from the previous quarters and clock double-digit growth in volume and sales during the June-September period. The cookie marker is scheduled to announce its Q2 earnings on Monday.

“Britannia will post 12 per cent revenue growth as demand for biscuits remains high as it is a cheap and hygienic product in terms of consumption with many more tea drinking occasions,” said analysts at Elara Securities.

They projected sales for the quarter at Rs 3,411.8 crore, up 11.9 per cent year-on-year and profit at Rs 463.2 crore, a growth of 14.7 per cent.

In the June quarter, which was highly affected by pandemic-led restrictions, Britannia more than doubled its profits to Rs 542.68 crore. In the September quarter last year, it had posted a 74 per cent increase in net profit to Rs 492.58 crore.

“Strong sales growth will be led by estimated 11 per cent volume growth. Moderation in wheat, SMP and sugar prices will expand gross margins by 150bps. Cost savings will likely drive EBITDA margin expansion and growth but PAT growth will be lower,” said Emkay Research.

Shares of Britannia have been in demand, thanks to favourable business conditions for the company. It has delivered 23.79 per cent year-to-date, against Sensex which is down over 3 per cent in the same period.

“We expect the biscuit category to continue to benefit from increased in-home consumption, however with a decreasing magnitude, given that QSR, home delivery and roadside hawkers are incrementally gaining hack lost wallet share,” said analysts at Centrum Institutional Research.

They expect Britannia to deliver a 17 per cent revenue growth, led by 13.5 per cent domestic volume growth and the rest from product and price mix change.

“We note YoY inflation in Crude Palm Oil (+36 per cent), and Sugar (+2 per cent), while benign costs for Wheat (-12 per cent) and Milk Powder (-17 per cent) could weigh on margin. We expect 114bps EBITDA margin expansion led by operating leverage gains and cost optimization efforts,” they said in a note.

JM Financials also sees a strong uptick in Britannia’s growth amidst the pandemic. It projects sales at Rs 3,523.3 crore, up 16.6 per cent and adjusted profit at Rs 254.6 crore, up 4.3 per cent YoY.

“Comments on exit growth rate would be key. Scale leverage plus cost efficiencies expected to drive operating margin expansion of 317bps and consequent 39 per cent growth in EBITDA,” the brokers said.

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