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Steady quarter; growth momentum improving

* Britannia Industries (BRIT) reported consolidated revenue growth of 9.5% YoY to INR49.6b in 1QFY27 (in line), led by volume growth of 9% (est. 6%). Demand remained resilient despite temporary disruption from dual pricing in rural wholesale channels during Apr-May, with normalization in June. BRIT exited the quarter with a mid-teens revenue growth trajectory. Pricing normalization and continued media investments helped BRIT deliver sequential market share gains. General trade recovered meaningfully (1.5x FY26 growth), while alternate channels continued to outperform.

* Gross margin expanded 120bp YoY to 41.5% (in line), while EBITDA margin increased only 40bp YoY to 16.8% (in line), given elevated brand investments. Commodity pressures remain elevated across industrial fuel (LPG/PNG), laminates, palm oil, and sugar. Management indicated that only ~50% of commodity inflation was recovered through pricing in 1Q, primarily via shrinkflation, with another 1-2% pricing likely over the coming quarters. BRIT continues to mitigate inflation through calibrated pricing, packaging optimization, procurement efficiencies, and alternate fuel usage, while maintaining higher A&P investments to strengthen brand health and market share. We model 19%-19.5% EBITDA margin for FY27E/FY28E.

* BRIT's business momentum improved further toward the end of 1Q. Moreover, GT recovery and sequential market share gains reinforce confidence in growth acceleration over the coming quarters. Commodity inflation and geopolitical uncertainties remain near-term monitorables. BRIT expects further pricing actions alongside continued cost optimization to protect margins. Healthy double-digit growth across adjacent categories and rapid expansion of alternate channels provide additional growth levers. We expect earnings growth to strengthen as pricing actions, improving channel mix, and execution under the ‘Many Indias’ strategy offset cost headwinds. We model revenue and PAT CAGR of 11% and 14%, respectively, over FY26-28E and reiterate our BUY rating with a TP of INR6,700, based on 50x Mar'28E EPS.

Highlights from the management commentary

* The company was only able to mitigate half of the 1Q inflation through price increases, primarily executed via shrinkflation. ? Management indicated that additional pricing of 1-2% is likely over the coming quarters as shrinkflation implementation progresses.

* Following the pressure from competitor pricing tactics in early 1Q, BRIT witnessed a sequential market share gain across a large number of biscuit categories, aided by focused regional interventions and stepped-up media investments.

* Commodity and fuel costs remain elevated compared to February levels. Key pressure points include industrial fuel (LPG/PNG), which spiked 2.5x in April/May before stabilizing around 1.5x (up +69% YoY). Palm oil continued to witness a sequential inflation, while sugar prices rose 3% YoY/QoQ in 1Q and surged by another INR7/kg in the weeks following 1Q. Flour and milk prices also remained elevated

Valuation and view

* We maintain our EPS estimates for FY27-28.

* We expect BRIT's growth momentum to strengthen over the coming quarters, supported by:

1) normalization in LUP pricing

2) recovery in GT

3) execution of the ‘Win in Many Indias’ strategy

4) rapid scaling of E-com/QC supporting premiumization

5) continued product innovation and brand investments. While commodity inflation remains elevated, further pricing actions and cost optimization initiatives should help mitigate margin pressure.

* We model revenue and PAT CAGR of 11% and 14%, respectively, over FY26- 28E and reiterate our BUY rating with a TP of INR6,700, based on 50x Mar'28E EPS.

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