Britannia Industries shares rose 20% in a year; what lies ahead for the FMCG stock?

Shares of FMCG firm Britannia Industries Ltd have surged 20% in a year, logging maximum gains for investor during the period. Interestingly, the stock hit a 52-week low of Rs 3743 on November 4, 2022, clocking 21% gains in nearly a year. After nine months, Britannia stock touched an all-time high of Rs 5268.55 on July 6, 2023.  

In the current session, Britannia Industries shares were trading flat at Rs 4564.14 on BSE. Market cap of the firm rose to Rs 1.09 lakh crore. Total 1162 shares changed hands amounting to a turnover of Rs 53 lakh. Britannia Industries shares have risen 6.23 per cent since the beginning of this year. Britannia Industries has a one-year beta of 0.5, indicating very low volatility during the period.       

In terms of technicals, the relative strength index (RSI) of Britannia Industries stock stands at 51, signaling the stock is trading neither in the oversold nor in the overbought zone. Britannia Industries shares are trading higher than the 5 day, 10 day, 20 day, 30 day, 50 day but lower than the 100 day, 150 day and 200 day moving averages.   

Britannia Industries reported a 19% year-on-year (YoY) growth in consolidated net profit to Rs 588 crore for the quarter ended September 2023. Net revenue from operations rose merely 1% on year to Rs 4,433 crore.  

Operating profit or earnings before interest, taxes, depreciation and amortization (EBITDA), climbed 23% on year to Rs 872.42 crore. Operating margin expanded a whopping 343 basis points to 19.68%. 

Macquarie is neutral on the stock with a target price of Rs 4350. “Current premium compared to peers is at higher end of a comfortable range. Thus, it remains vigilant of price-based competition,” said the brokerage. 

HSBC has assigned a hold call on the stock with a target price of Rs 4700.  

“September 2023 sales at 0.8% were below expectations with flat volume growth for second consecutive quarter. Rising competition & falling commodity prices also portend a phase of volume-led growth, with little scope for margin uptick,” said the brokerage.  

 For traders, Religare Broking suggested Britannia Industries shares with a long-term view. The brokerage has assigned a 'Buy' rating for a target of Rs 5,348.  

“Britannia's gross profit grew by 11.5%/13% YoY/QoQ to Rs 1,901 crore with margin at 42.9% which saw healthy improvement of 396bps/95bps YoY/QoQ because of decline in raw material price mainly palm oil while flour and sugar was marginally higher,” Religare said. 

Motilal Oswal has assigned a target price of Rs 4,680 post Q2 earnings and has maintained neutral rating on the stock.  The brokerage has maintained its FY24/FY25 EPS estimates.  

"Britannia Industries valuations at 51xFY24E P/E and ~44xFY25E P/E appear rich. Although we are optimistic about its potential in the packaged food space in the long run as well as its remarkable progress in direct distribution and high RoE, we believe the current valuations already price in these positive factors," added Motilal Oswal. 

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