Britannia’s 11.3% y-o-y revenue growth was in line, while EBITDA and PAT surge of 4.5% and 5.8% y-o-y, respectively, came slightly below estimates. Overall volumes grew 7% y-o-y, dragged by dip in bread and international business; otherwise, core business (biscuits, cake and rusk) volumes jumped 10% y-o-y. Unexpectedly high raw material price inflation (up 12% y-o-y) resulted in 335bps gross margin dip, mitigated to some extent via price hikes (4% YoY in Q2FY17) and cost efficiency measures. Britannia will benefit from pick up in biscuit market growth (clocked mid single digit growth versus flat in Q1FY17) and recovery in demand led by good monsoon and government initiatives. Maintain buy.
Key highlights: (i) consolidated and standalone sales growth came in at 11.3% and 12.2% y-o-y, respectively. Consolidated sales growth was impacted by soft bread and international sales; (ii) consolidated and standalone EBITDA margin dipped 92bps and70bps y-o-y, respectively, impacted by inflationary pressure in key raw materials; and (iii) standalone PAT growth at 10.7% y-o-y was higher than consolidated PAT spurt of 5.8% y-o-y due to gross margin pressure and higher tax rate in the dairy business. While urban grew in single digits, rural growth was in high double digits led by 18·20% y-o-y surge in the Hindi belt. We maintain ‘buy/sector outperformer’ with target price of `3,369.