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Est. Vs. Actual for Q1FY26: Revenue – BEAT; EBITDA – MISS; PAT – MISS

Changes in Estimates post Q1FY26

FY26E/FY27E: Revenue: -1%/-1%; EBITDA: -1%/-5%; PAT: -1%/-5%

Recommendation Rationale

Britannia's Q1FY26 results: Britannia reported ~10% YoY revenue growth (2% volume growth), driven primarily by calibrated price hikes and market share gains in key regions. Urban and rural markets continued their growth momentum, supported by distribution expansion. However, the East region was impacted due to distribution restructuring, as Britannia is in the process of appointing a mega distributor to gain better control of the region. The delta between volume and value growth is expected to remain in the range of 6-7% over the next two quarters, owing to a higher salience (at 60%) of lower price point packs.

Margin guidance amid commodity inflation:  Gross margins declined by 260 bps YoY to 39.2%, impacted by sharp cost inflation in key raw materials. However, on a sequential basis, commodity inflation has seen some easing and is likely to remain stable at current levels. Management reiterated that the price hikes taken so far have mostly offset the earlier raw material inflation, and if raw material prices remain stable, margins are likely to improve going forward. EBITDA margins declined by 135 bps to 16.4%, though partially offset by stringent cost efficiency measures, including an 8% YoY reduction in other expenses. Management reaffirmed its focus on maintaining EBITDA margins at current levels while remaining competitive.

Sector Outlook: Cautiously optimistic

Company Outlook & Guidance: As the near-term demand recovery would be gradual, we maintain our HOLD stance in the stock.

Current Valuation: 47xMar-27 EPS; ( Earlier Valuation: 48xMar-27 EPS).

Current TP: Rs 5,800/share; ( Earlier TP: Rs 5,910/share).

Recommendation: With an upside of 8% from the CMP, we maintain our HOLD stance. 

Financial Performance

Revenue grew ~10% YoY to Rs 4,535 Cr, driven by calibrated price hikes and market share gains in key regions. Gross margins contracted by 260 bps YoY to 39.2%, impacted by steep inflation in key commodity inputs. EBITDA margin declined 135 bps YoY to 16.4%, partly cushioned by higher operating leverage and cost efficiency measures. PAT stood at Rs 521 Cr, up 3% YoY.

Outlook: Most FMCG companies, including Britannia, have reiterated signs of recovery across both urban and rural markets. With raw material prices stabilising, margins are expected to improve in the coming quarters. However, the recovery is likely to be gradual, with meaningful traction expected in H2FY26, supported by the festive season, stable monsoons, and a benign inflationary backdrop. That said, increased competitive intensity and the fact that key positives appear largely priced in, lead us to believe the stock will remain range-bound. We maintain our HOLD rating

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