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Revenue growth remains mixed: Britannia reported mixed revenue growth for Q4FY24 with an increase of 1.1% YoY but a decline of 4.4% QoQ to Rs 4,069cr. The company is facing stiff competition however their initiatives such as increasing spends on brands, expanding distribution reach and price competitiveness is driving market share as well as the overall growth for the company. For FY24, price hikes led to revenue growth of 2.9% YoY to Rs 16,769cr.

Flat Margins: Its gross profit grew by 1.1% YoY but declined by 2.2% QoQ by Rs 1,827cr due to muted topline performance. Further, raw material cost saw an increase of 1.2% as compared last year but sequentially it declined by 6.1%. Thus, leading to flat gross margin on YoY basis while improvement of 102bps QoQ to 44.9%. Further, its EBITDA declined by 1.7%/4.1% YoY/QoQ to Rs 787cr while margin declined by 56bps YoY but was flat sequentially to 19.4% due to increase in other expenses which includes advertisements spends as well. Adjusted PAT was down by 3.8%/3.4% YoY/ QoQ to Rs 537cr with PAT margin at 13.2%, decline of 67bps YoY but marginal increase of 13bps QoQ. For FY24, its Gross and EBITDA profit grew by 8.5% /12% YoY and also margins improved to 43.4% (improvement of 224ps YoY) and at 18.9% (increase of 154bps), respectively.

Management plan & strategy: Going ahead for FY25, management remains cautiously optimistic as near term challenges to persist for a few quarters while 2HFY25 to see improvement led by improving demand conditions, better monsoon and election outcome. Further, their focus remains on growing topline and anticipates achieving double digit volume growth, also forecast commodity inflation to be at manageable levels.

Key highlights: 1) Commodity inflation expected at around 3% for FY25. 2) Gained market share post challenging H1FY24. 3) Growth drivers ahead are to focus on innovations, Adjacent business, cost programs and distribution reach. 4) Have a direct reach of 27.9 lakh outlets and rural distribution at 30K RPDs. 5) Focused states of Hindi belt areas are growing faster as compared to others. 6) Focusing on route to market strategy 2.0 by concentrating on data analytical and AI. 7) Connecting youth via modern marketing techniques such as digital & social media. 8) Amongst segment biscuit to be the core priority. 9) Price action and promotion activity continued for brands such as Good Day, Marie Gold, Milk Bikis, 50-50, Treat, Gol-Maal & Pure Magic. 10) Innovation & renovation continued for the quarter and fresh launches were Good day fruit & nuts, Toastea cake rusk and Bourbon Milk Shake. 11) For Cheese, differentiate products continue to gain traction. 12) Winkin Cow drinks gaining traction on the back of ongoing summer season. 13) Commodity fluctuation to be closely monitored going ahead.

Outlook & Valuation: Britannia posted a soft quarter, however management remains positive on the growth prospect going ahead. We believe their strategy of investing behind brands & innovating products along with scaling adjacent categories and expanding distribution reach as well as managing cost bodes well for overall growth. Moreover, they have plans to drive volume led growth as well as add new product categories, focus on premium products along with expanding across new age distribution channels to gain market share. Meanwhile, on the financial front, we expect its revenue/EBITDA to grow 10.0%/13.1% CAGR over FY24-26E. Thus, maintaining our Accumulate rating on Britannia we have revised our target price upwards to Rs 5,633.

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