Britannia shares end 7% lower as Q2 earnings fall below estimates 

Shares of Britannia Ltd ended over 7% on Tuesday after Q2 earnings of the FMCG firm came below expectations. Britannia stock ended 7.32% lower at Rs 5028.25 against the previous close of Rs 5425.30 on BSE. Market cap of the firm slipped to Rs 1.21 lakh crore. Earlier, the stock opened higher at Rs 5526.60 on BSE. The stock has lost 5.41% this year and risen 7.51% in a year. In five years, the Britannia stock has risen 61.36%. 

Total 0.62 lakh shares of the firm changed hands amounting to a turnover of Rs 32.08 crore on Tuesday. Market cap of the firm fell to Rs 1.21 lakh crore. Britannia stock hit a 52-week low of Rs 4628.30 on November 28, 2023 and a 52-week high of Rs 6473.10 on October 3, 2024.  

In terms of technicals, the relative strength index (RSI) of the stock stands at 32.5, signaling it's trading neither in the overbought and nor in the oversold zone. Britannia shares have a beta of 0.3, indicating very low volatility in a year. Britannia shares are trading lower than the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day, 150 day and 200 day moving averages. 

The FMCG firm reported a 9.4 percent fall in consolidated net profit at Rs 531.5 crore against Rs 586.5 crore in the year-ago period. The profit came lower than street estimates of Rs 630 crore.

However, revenue from operations rose 5% to Rs 4,667.6 crore in the last quarter compared to Rs 4,432.88 crore in the same period of the previous financial year.

However, revenue came below market expectations of Rs 4,769 crore due to tepid consumer demand caused by severe commodity inflation.

EBITDA slipped 10.3% to Rs 783.4 crore in the last quarter against Rs 872.4 crore in Q2 of the previous fiscal. It came below market consensus of Rs 895 crore on account of higher raw material prices.

Brokerage Nuvama has maintained a buy call with a price target of Rs 6,590. 

"Britannia’s Q2FY25 volume growth of 8% YoY and revenue growth of 5.3% YoY was in-line with our estimates. EBITDA (down 10% YoY) was below our/consensus estimates due to 45% higher staff costs (includes ESOPs revaluation of ~INR500mn). Excluding this, EBITDA is in-line with our estimate, but lower than consensus. Gradual price hikes of 4–5% could help mitigate the impact of increased RM costs with likely reversal of import duty hike on palm oil. Pilot programmes in distribution in 25 cities have yielded promising results. Baking in inflationary trends in key RM and higher staff costs in Q2FY25, we are cutting FY25E/26E/27E EPS by 7.5%/5.8%/6%. This yields a revised target price of Rs 6,590 (earlier Rs 7,010); maintain ‘BUY’," said Nuvama. 

Akriti Mehrotra, Research Analyst, StoxBox said, "Looking ahead, Britannia will remain vigilant of commodity price volatility, particularly in light of geopolitical uncertainties. With a strong emphasis on long-term growth and market positioning, Britannia is well-equipped to navigate the fluctuating economic landscape and capitalize on emerging opportunities."

Global brokerage Goldman Sachs has maintained neutral stance on the stock with a target price of Rs 5,350.

Q2 earnings came significantly below the estimates, said the brokerage adding that volume growth in high-single-digit, but revenue growth was lower while EBITDA margins declined sharply and the input cost pressure is likely to increase in H2FY25.