Target:₹6,000
CMP: ₹5,492.05
Britannia Industries reported better-than-expected growth and margins in Q4FY25. The outlook for FY26 is also positive with price hikes already in place and moderation in palm oil and sugar prices, which account for 50 per cent of raw material costs. In Q4, the company saw 5.5 per cent pricing contribution vs no contribution in Q3. Benefits of price hikes are expected to continue for most of FY26. Price hikes could have a slightly negative impact on volumes, which we expect to be largely offset by an improving macro. We raise our FY26E sales/EBITDA/EPS by 1.6 per cent/6.5 per cent/9 per cent.
In FY26, Britannia expects to get its revenue growth back to double-digits while sustaining margins and expects to drive earnings growth ahead of sales growth. The management expects the combined revenue contribution from quick and e-commerce to increase to 8 per cent in the next three years, from 4 per cent in FY25. As of FY25, the company has expanded its direct reach to 2.9 million outlets (vs 2.8 million in FY24), and total rural distributors to 31,000 (vs 30,000 in FY24). In Q4FY25, the company launched Winkin Cow grow flavoured milk and relaunched cheese and cake. It is looking for a new CEO and expects to make an announcement in the next 3-4 months.
After flattish earnings in FY25 due to margin pressure, we expect Britannia to report 15 per cent earnings CAGR over FY25-27E. We value the stock at 50x FY27E P/E and maintain our Outperform rating.
Published on May 13, 2025
