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Double-digit growth is an uphill battle

Regains market share on the back of strategic pricing actions   

Britannia (BRIT IN) recorded sales growth of 1.1% YoY (vs our estimates of 2.1%), led by value growth of 3% and volume growth of 6% in Q4FY24. To tackle increased competition, BRIT has implemented strategic pricing adjustments and targeted consumer promotions in key products and markets, thereby regaining market share by end-FY24 and offset losses from H1FY24. The company saw growth propelled by distribution expansion in focused states, resulting in a growth rate of 2.4x faster than the rest of India in FY24. Successful product innovations, such as Jim Jam Pops, Treat Cream Biscuits, 50-50 Golmaal, Goodday Fruit & Nut Cookies, Cake Rusk, and Bourbon Milkshake, contributed ~INR 2.8bn in annualized revenue. Near-term volume growth may remain muted with likely acceleration post Monsoon, targeting double-digit growth in H2FY25.  

RTM 2.0 to unlock growth potential

BRIT's latest initiative, RTM 2.0, marks a significant shift in its distribution strategy, aimed at expanding adjacent businesses while strengthening its core portfolio. This program targets enhancing throughput from high potential outlets by optimizing service architecture, increasing street fleet with split portfolios, and implementing AI-driven predictive ordering to bolster product range sales. BRIT has scheduled a pilot for H2FY25, with a duration of 12 months. 

Focus on sustaining EBITDA margin at 19%

Q4FY24 EBITDA margin came in at 19.4% vs our expectations of 18.5%, down 60bp YoY due to increased ad spend. While management expects  inflation to remain ~3% for FY25, it does not anticipate much change in  margin and expects it at FY24 level of ~19%.

Valuation: reiterate Reduce with a higher TP of INR 5,210

We raise our earnings by 4.0% for FY25E and 5.3% for FY26E to factor in better margin. We reiterate Reduce given a 7% rise in the stock price post results and no major change in revenue growth even as we factor in double-digit growth in H2FY25. We raise our TP to INR 5,210 from INR 4,940 on 46x (unchanged) FY26E P/E. Risk to our call includes a sharp increase in volume.

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