Britannia Industries (NS:BRIT) posted decent results for Q2 FY24, ending September, as the company's revenue saw an uptick. Total (EPA:TTEF) revenue from operations rose to INR 4,667.57 crore, marking a 5.3% year-on-year increase, bolstered by strong domestic demand, a wider product range, and expanded distribution across rural and urban India. However, while revenue showed a solid uptrend, rising costs took a toll on margins, leading to a net profit decline of 9.4% at INR 531.55 crore.
Despite good revenue figures, driven by INR 4,713.57 crore in total operating income (up from INR 4,485.23 crore in Q2 FY24), profitability challenges emerged. Britannia’s material costs surged by 12.9% to INR 2,578.05 crore, reflecting rising raw material expenses, while employee expenses rose 45.3% year-on-year to INR 232.28 crore as the company focused on workforce expansion and talent retention amid competitive pressures.
Varun Berry, Britannia’s VC & MD, noted an 8% volume growth and steady revenue despite inflation pressures. "Our operating profits and revenue growth are satisfactory in the face of severe commodity inflation and muted consumer demand in many FMCG categories," he stated.
Profit before tax, after adjustments, stood at INR 715.15 crore, down from INR 798.63 crore in the same quarter last year, with tax expenses reaching INR 183.60 crore. The net profit settled at INR 531.55 crore, reflecting a dip from INR 586.50 crore in Q2 FY24. Operational expenses, impacted by inflationary logistics costs, also rose by 11.1% to INR 3,994.87 crore.
Britannia also reported INR 4,566 crore in consolidated sales for Q2, a 4.5% year-over-year rise, though PAT declined by 9.6% to INR 531 crore. For H1 FY24, sales increased 4.3%, while PAT slightly declined by 0.8%, showcasing Britannia’s steady sales resilience against economic challenges.
A significant event this quarter was INR 24.79 crore in exceptional expenses due to voluntary retirement schemes and labor restructuring, aimed at optimizing operational efficiency long-term. In addition, contract labor investments supported increased production targets.
Berry highlighted Britannia’s product diversification progress, with emerging categories like croissants and wafers showing healthy growth. "Our efforts to optimize distribution across 50,000 outlets in 25 cities have yielded encouraging results," he added.
Image Source: InvestingPro+
The stock is already down 12.9% in the last 30 days but still seems to be a bit overvalued. After doing automated financial modeling via 14 complex models in InvestingPro+, the fair value of the stock comes at INR 4,498.5. This translates into a decent downside potential of 13.4% from the CMP of INR 5,197.
Even ProTips also cautioned investors regarding the higher earnings multiple at which the stock is trading without investors having to dive deep into the financial statements to know this information.
Those who are still lagging behind in getting such important information can avail lucrative discounts of up to 55% in the Black Friday Sale!
Read More: How InvestingPro+ Pinpoints High-Quality Stocks with the Piotroski Score
X (formerly, Twitter) - Aayush Khanna
LinkedIn - Aayush Khanna