Britannia’s Stock Skyrockets to New High Amid Market Gains and Strong Earnings

Britannia (NS: BRIT ) Industries’ shares reached an all-time high of Rs 4867.05 on June 7, marking the fourth consecutive day of growth alongside a thriving broader market. 

In just four days since March 28, Britannia has witnessed impressive growth, nearly 5% in total, with an overall rise surpassing 16% during that period alone. Meanwhile, both Sensex and Nifty have seen increases around 6% upticks each.

Analysts attribute these positive results to better-than-expected earnings reported by the fast-moving consumer goods (FMCG) giant for FY23's fourth quarter: consolidated net profit jumped by an astounding 47.53% YoY reaching Rs 557.6 crore due in part to distribution expansion efforts combined with efficient cost management strategies and decreasing commodity prices.

Britannia revealed operational revenues totaling Rs 4,023.18 crore, marking a noteworthy gain of over 13 percentage points compared to last year’s figure at roughly Rs 3,550 crore.

A second straight quarter demonstrated significant gross margin expansion for the company; increasing seventy basis points QoQ while skyrocketing 580 basis points YoY to an unprecedented 43.1%.

Key factors contributing to this remarkable gross margin growth include declining palm oil and packaging material prices, which effectively counterbalanced inflationary challenges faced by commodities such as wheat and dairy, according to a report from Jefferies.

Although Q4 volume growth was slightly below expectations at just one percent, Britannia's management remains optimistic about the upcoming fiscal year (FY24), anticipating a boost in volume growth driven by various initiatives like distribution expansion, scaling up adjacencies, and implementing necessary price adjustments for specific brands and stock-keeping units (SKUs).

JM Financial (NS: JMSH ) recently noted that while these adjustments may offset some of the gross margin gains resulting from favorable cost trends, it is expected that FY24’s operating margin will surpass its predecessor (excluding excess incentives included during that period).