Published on 15/12/2020 10:28:04 AM | Source: Motilal Oswal Financial Services Ltd

Update On Britannia Industries Ltd By Motilal Oswal

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Sales below expectations; EBITDA and PAT broadly in line

* BRIT’s consol. sales increased 12.1% YoY to INR34.2b (v/s est. INR36.3b) in 2QFY21. Standalone sales grew 11.4% YoY to INR32.3b. We believe base business volume increased ~10% (no mention of volume growth in press release; our est. +15.5%). Consol. EBITDA grew 37.2% YoY to INR6.8b (v/s est. INR6.9b) while consol. PBT grew 34.3% YoY to INR6.7b (v/s est. INR6.9b). Consol. adj. PAT grew 22.7% YoY to INR5b (v/s est. INR5.2b).

* Consol. gross margin expanded by 240bp YoY to 42.5%. Management has mentioned that moderate inflation was witnessed in prices of key raw materials.

* As % of sales, lower staff cost (-10bp YoY) and lower other expenses (-110bp YoY) meant that EBITDA margin expanded 360bp YoY to 19.8%.

* 2QFY21 standalone sales, EBITDA and adj. PAT grew 11.4%, 32% and 1% YoY, respectively. EBITDA margin was up 300bp YoY to 19.2%.

* 2QFY21 imputed subsidiaries sales and EBITDA grew by 25.4% and 149%, respectively. Imputed subsidiaries registered a profit of INR358m in 2QFY21 (v/s loss of INR884m in 2QFY20), while EBITDA margin expanded by 1,410bp YoY to 28.4%.

* In 1HFY21, the company placed and redeemed inter-corporate deposits (ICDs) of INR8.6b and INR10.8b, respectively. This led to net reduction of INR2.2b of ICDs.


Consol. balance sheet highlights (as of Sep’20)

* Inventory stood at INR14.7b, up 12.4% YoY and up 98.3% v/s Mar’20 level.

* Receivables stood at INR3.2b, down 8.3% YoY and flat v/s Mar’20 level.

* Payables stood at INR14.4b, up 27% YoY and up 28.9% v/s Mar’20 level.


Highlights from press release

* In 2QFY21, BRIT (a) got its full range of products to the market, (b) focused on efficiency in distribution, (c) followed the continuous replenishment system of distribution, (d) improved the health of its distributors, and (e)inched closer to normalcy in advertisement and promotions.

* All the adjacent businesses too delivered healthy profitable growth.

* The company expects raw material prices to be stable given the positive outlook on monsoon and harvest.

* BRIT has sustained a large part of the efficiency gains that it witnessed in the previous quarter – supply chain efficiencies, reduction in wastages and fixed cost leverage.


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