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Growth to improve from Q2

Britannia Industries (BRIT IN) reported Q4FY26 net sales at INR 47.2bn, up 6.5% YoY, lower than our estimates, led by 5.5% domestic volume growth. The domestic business witnessed moderation due to dual pricing challenges in INR5-10 packs post GST in the wholesales channel while double-digit growth was reported in offline distribution, modern trade & eCommerce. Management says domestic demand and international business disruption are likely to stabilize by end-Q1FY27. EBITDA growth was softer, due to elevated brand investment and higher overheads. We cut our EPS by 3.8% for FY27E and 3.7% for FY28E as we factor in lower-than-expected revenue. We reiterate Accumulate and a lower our TP to INR 6,250 on 50x March 2028E P/E as we roll forward

Dual pricing and supply chain disruptions weaken demand:

BRIT reported consolidated revenue growth of 6.5% YoY to INR 47.2bn in Q4FY26, below our estimates. Domestic volume growth was 5.5% in the quarter. International business took a hit during the quarter, due to supply chain disruptions in Oman and Dubai following the West Asia conflict; however, management has shifted manufacturing operations from Oman to Mundra to improve exports agility toward North America. The quarter started on a healthy footing with ~9% growth during January-February before moderating in March, due to supply disruptions. Management says ~75% of the business was driven via B2C channels, and it remained resilient and grew in the double digits, while the rest making up the wholesale channel slumped, due to dual pricing in the market on increased competition. Excluding affected packs, growth trends remain healthy with non-INR 5-10 portfolios witnessing strong doubledigit growth.

Focus on growth in qCommerce channel and innovation to expand offerings:

eCommerce contribution further increased to ~6% of domestic sales. Organized trade remains strong with eCommerce growing at 50-60% and modern trade at 15-16%. BRIT reiterated focus on innovation-led growth, adjacency expansion, and evaluating inorganic opportunities to strengthen its growth platforms.

Calibrated price hikes ahead:

The company continues to focus on calibrated pricing actions and grammage adjustments following GST transition, particularly in INR 5-10 packs. Gross profit increased 11.9% YoY to INR 19.9bn, supported by stable commodity trends and operational efficiency. BRIT is maintaining healthy inventory cover for key inputs, such as wheat and palm oil, although milk prices, fuel and laminates remain inflationary. EBITDA grew 5.9% YoY to INR 8.5bn, below our estimates, due to higher brand investment, while EBITDA margin declined 9bp YoY to 18.1%.

Reiterate Accumulate with a lower TP of INR 6,250:

We cut our EPS by 3.8% for FY27E and 3.7% for FY28E as we factor in lower-than-expected revenue. We reiterate Accumulate with a lower TP of INR 6,250 from INR 6,975 on 50x (from 55x) March 2028E P/E, as we roll forward by a quarter. We introduce our FY29 estimates.

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