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Pricing Led Top Line Growth; Maintain HOL

Est. Vs. Actual for Q3FY25: Revenue – BEAT; EBITDA – BEAT; PAT – BEAT

Changes in Estimates post Q3FY25

FY25E/FY6E: Revenue: 0%/-1%; EBITDA: 2%/0%; PAT: 2%/0%

Recommendation Rationale

* Britannia's Q3FY25 results: Britannia's Q3FY25 results exceeded our estimates on all fronts. Despite a subdued demand environment, the company’s consolidated revenue grew by 6.5% YoY (versus our estimate of 5%), driven by a 6% YoY volume growth. Management indicated a 6-6.5% cumulative price hike, with a 2% increase implemented in Q3, 2.5% planned for Q4, and an additional 1.5% in Q1FY26 to mitigate an 11% inflation impact. Notably, focus states expanded at 2.6x, while rural distribution grew from 30,000 to 31,000 outlets in Q3FY25.

* Margin guidance amid commodity inflation: Gross margins declined by 606 bps YoY to 36.9%, impacted by sharp cost inflation in wheat, palm oil, and cocoa. Consequently, EBITDA margins declined by 89 bps to 18.4%, though partially offset by stringent cost efficiency measures, including a 47% YoY reduction in staff costs. Management reaffirmed its focus on maintaining EBITDA margins at current levels, with absolute profit growth expected to continue, supported by price hikes and operational efficiencies.

* Demand Outlook: The company remains agile in responding to commodity price fluctuations and competitive pricing trends. While sector-wide challenges persist, the overall trajectory appears stable. However, near-term headwinds, including soft demand, urban market weakness, rising input costs, and intensifying competition, may constrain growth and margins, keeping the stock range-bound.

Sector Outlook: Cautious

Company Outlook & Guidance: As the near-term outlook remains challenging, we maintain our HOLD stance in the stock. However, we have increased our FY25/FY26 estimates.

Current Valuation: 45xDec-26 EPS (Earlier Valuation: 50xSep-26 EPS ).

Current TP: Rs 5,130/share (Earlier TP: Rs 5,000/share)

Recommendation: With an upside of 5% from the CMP, we maintain our HOLD stance

Financial Performance

Revenue grew by 6.5% YoY, reaching Rs 4,463 Cr, driven by single-digit volume growth (~6% YoY). Gross margins declined by 606 bps to 36.9% due to a steep rise in key commodity prices (wheat, palm oil, cocoa). EBITDA margins stood at 18.4%, down by 89 bps, partly offset by higher operating leverage. Adjusted PAT was Rs 582 Cr, up 4.5% YoY

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