Britannia shares at record high; jump 10% post strong Q2 show. More upside ahead?

Shares of Britannia jumped over 10 per cent to hit an all-time high of Rs 4181.40 after the company reported robust set of numbers for the quarter ended September 2022.

The FMCG major posted an 8.38 per cent rise in its net profit to Rs 490.58 crore in the second quarter of this fiscal year as compared to Rs 384.22 crore during the previous quarter ended September 2021.  

Read more: Britannia Industries' net profit rises 28% to Rs 490 crore in Q2

The company recorded its "highest quarterly revenue", Britannia Industries said in its filing at BSE on Friday. Revenue from operations went up by 21.4 per cent to Rs 4,379.61 crore from Rs 3,607.37 crore same quarter last fiscal. 

Brokerges are looking bullish on this stock after the company's stellar performance. JM Financial said Britannia’s Sep-Q report was a huge positive surprise, while suggesting a target price of Rs 4,210.

It said the 17% price-hike vs 9-11% levels seen in recent few quarters is what made the difference to 2Q margin profile, in our view. 

Management alludes to positive growth momentum in the business over the last few months – very different from the commentaries from other FMCG players (especially the HPC ones) that consumer sentiments more so in rural areas are still significantly down due to persistent retail inflation in the economy. 

It added that Britannia’s growth acceleration is likely more backed by the success of its own GTM strategy and increase in distribution reach.

ICICI Securities has upgraded the stock from 'Hold' to 'Add' rating with a target price of Rs 4,300. Britannia has seen one of the most resilient (core) performance in the last three years (backed by share gains). Consensus (including us) expects Britannia to invest in
new categories, till now, pressure on core margins was not providing ammunition, it said.

"That said, it will now have to re-earn the (premium) multiple as consensus was generous in previous re-rating cycle (narrative of Total Foods Company precovid). Going forward, success of (at least a few) new segments and ramp-up of adjacent categories is imperative. The outlook on this appears better," it added.

Nuvama Institutional Equities continues to remain positive on Britannia and has maintained a 'Buy' rating with the target price of Rs 4,620. It noted that a positive surprise came from margins with both gross and EBITDA margins growing YoY/QoQ. It saw multiple product launches across categories and saw strong growth.

Overall, it said that the revenue momentum was a positive, led by the biscuits category. This ties up with our anti-consensus stance that biscuits is one of the few categories that is seeing revival in consumption.