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    Brokerages see up to 32% upside on Britannia post mixed Q4 nos. What should you do?

    Synopsis

    Britannia Industries reported a 47% YoY rise in consolidated net profit for Q4FY23, resulting in several brokerages being positive on the stock. Foreign brokerage JP Morgan has maintained a neutral rating while Morgan Stanley remained a buyer with a target of Rs 5,300. Domestic brokerage houses PhillipCapital and Sharekhan have retained a buy on the counter. However, HDFC Securities has given a reduce on the stock. Challenges of low volume growth and volatility in raw materials are likely to continue, it said.

    Should investors ‘buy’, ‘sell’ or ‘hold’ Britannia shares following its mixed Q4 earnings?Agencies
    Britannia Industries’ mixed Q4FY23 earnings reported on Friday have made several top brokerages positive on the stock, expecting a potential upside of up to 32%. While foreign brokerage JP Morgan has maintained a ‘neutral’ rating on the stock, Morgan Stanley has a ‘buy’ stance. Domestic brokerages PhillipCapital and Sharekhan have retained ‘buy’ on the counter but HDFC Securities has given a ‘reduce’ on the stock.

    Britannia Industries reported a 47% year-on-year (YoY) rise in consolidated net profit for the March quarter to Rs 559 crore, on the back of over 13% growth in the revenue to Rs 4,023.18 crore.

    The profit after tax (PAT) was higher than the ETPoll estimate of Rs 503 crore while the revenue was slightly lower from estimated Rs 4,080 crore.

    For FY23, the company reported a 52.3% YoY rise in consolidated net profit to Rs 2,322 crore. Revenue from operations increased 15.3% YoY to Rs 16,300.55 crore.

    On Friday, Britannia shares were trading at Rs 4,627.95 in the early trade and were up by Rs 40.90 or 0.89%.

    JP Morgan: Neutral | Target: Rs 4,920 | Upside: 6.3%
    Brokerage firm JP Morgan maintains a "Neutral' stance on Britannia for a price target of Rs 4,920. Gross margin delivery continues to surprise positively, it said in a note. Revenue growth is likely to rebalance ahead with volume recovery and pricing moderation, the foreign brokerage said. Expect margin to moderate sequentially to 18% in FY24, it added.

    Morgan Stanley: Buy| Target Rs 5,300 | Upside: 14.5%
    Morgan Stanley maintained a ‘buy’ rating on Britannia Industries with a target price of Rs 5,300. The company beat estimates which were entirely margin-led.

    Britannia Industries gave lower guidance for FY24. The management focus is to build for the next 100 years, unlike investors who may overemphasise short-term margins.

    PhillipCapital: Buy | Target: Rs 5,000 | Upside: 32%
    Britannia Industries remains a preferred play for PhillipCapital and the domestic brokerage firm maintains a 'Buy' for the price target of Rs 5,000. The FV is based on 50X September 2024 EPS.

    Investors with long-term bias and patience are likely to be rewarded as formalisation will be more visible in the food space, given a higher share of the unorganised sector, who are themselves grappling with supply chain challenges, PbhillipCapital said. Moreover, consumer preference towards large, trusted and organised brands in this time of hyperinflation, it said further. Significant improvement in ROIC [Return on Invested Capital] is expected to inch-up to 62% in FY25 vs 47% in FY22.

    Challenges of low volume growth and volatility in RM index are likely to continue.

    HDFC Securities: Reduce | Target: Rs 4,150 | Downside: 10%
    HDFC Securities values Britannia at 40X P/E on March 2025 EPS to derive a target price of Rs 4,150. It maintains a 'reduce' on the counter. The company will focus on consistent product launches, distribution expansion, marketing campaigns and tactical pricing actions to gain market share, it said.

    Sharekhan: Buy
    For Kaustubh Pawaskar, Deputy Vice President, Fundamental Research at Sharekhan by BNP Paribas, Britannia is a preferred pick in the consumption space. With some of the key input prices softening, the company would be focusing on improving its volume growth in FY2024 through relevant pricing action, he said. Improved mix, procurement efficiency, cost saving initiatives and large focus on in-house production will help margins to consistently improve in the coming years, Pawaskar added.

    Prabhudas Lilladher: Hold | Target: Rs 4,528 | Downside: 2.2%
    Amnish Aggarwal – Head of Research, Prabhudas Lilladher Pvt Ltd recommends a "Hold' on this FMCG stock adding that the company missed on revenues and volumes though margins continued to inch up.

    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)



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