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* BRIT topline was in line with our estimates, while EBITDA was 8% ahead of our estimates as margin came in at 19.9%, which is the highest barring the covid period. However, normalizing for the PLI benefits , EBITDA was in line with our expectations.

* Volumes grew ~2% for the quarter. The company is making investments in both greenfield and brownfield projects to expand its capacities, which would facilitate further growth in volume. The management has indicated that the company has been consistently increasing its market share and much of this is attributed to expanding its distribution reach.

* Although we like the structural investment case accompanied by healthy return ratios, these are priced in at valuations of ~51xFY24E EPS/~45xFY25E EPS. We reiterate our Neutral stance on the stock with a TP of INR4,600 (premised on 45x FY25E EPS). Sales and profitability remain in li

Sales and profitability remain in line

* BRIT’s consolidated sales rose 13.3% YoY to INR40.2b (est. INR41.0b) in 4QFY23. Consol. EBITDA/PBT/Adj. PAT increased 45.7%/45.9%/46.5% YoY to INR8.0b/INR7.6b/INR5.5b (est. INR7.4b/INR6.8b/INR5.5b).

* We believe base business volume rose ~2% YoY in 4QFY23 (est. +4%).

* Consolidated gross margin expanded 690bp YoY/130bp QoQ to 44.9% (est. 41%).

* EBITDA margin expanded 440bp YoY/40bp QoQ to 19.9% (est. of 18.0%).

* BRIT has received INR900m as a financial incentive under the PLI. Going forward, the company is expected to receive an amount of INR150m to INR200m per quarter under the same scheme. Adjusting for this, EBITDA margin would be ~18.5%.

* FY23 sales/EBITDA/Adj. PAT rose 15.3%/28.6%/27.6% to INR163b/INR28.3b/INR19.4b.

* On a standalone basis, sales/EBITDA/PAT were up 16.7%/52.2%/35.0% YoY in 4QFY23 to INR38.9b/INR7.9b/5.6b.

Highlights from the management commentary

* BRIT has been consistently gaining market share. Expanding its distribution channel, maintaining the freshness & quality of the product, and leveraging the inherent strength of its brand are all contributing to the company's growth in market share.

* Volume growth for the quarter was ~2% and this is expected to pick up in FY24. Nonetheless, the management’s emphasis will be on selling more packs.

* Flour prices have increased ~4% QoQ and ~21% YoY, while dairy prices have surged 20% QoQ, and there are indications of inflation in sugar prices.

* The increase in ‘Other operating income’ was attributed to the receipt of PLI in this quarter for FY22 and FY23, which amounted to INR900m. The company expects to receive ~INR150m-200m every quarter going forward.

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