Britannia (BRIT) 3QFY21 standalone revenue grew by 6%YoY while revenue from subsidiaries grew 14%YoY. Overall volume growth moderated to 4%YoY (v/s 22% in Q1 and 9% in Q2). Revenue from traditional channel grew at healthy rate driven by (i) strong growth momentum in rural and (ii) recovery in urban. Modern trade and institutional business continued to face growth headwinds. In dairy business, cheese grew at double digit while drinks segment witnessed recovery led by pick up in out of home consumption.
Gross margin expanded 224bp YoY to 43.1% (3rd consecutive quarter of expansion) led by deflationary raw material cost environment. Milk and flour prices declined; 15% and 7%YoY respectively while sugar and RPO price rose by 1% and 25% YoY respectively. Operating leverage and improvement in operational efficiency led to 249bp YoY improvement in EBITDA margin to 19.3%.
Commenting on the result review, the broking firm IDBI Capital Markets & Securities said, "Britannia 3QFY21 result was in-line with our estimates. Revenue growth moderates to 6%YoY (vs 12% in 2QFY21) driven by normalization in consumer upstocking trend. BRIT used to grow at this rate pre-covid during FY20. General trade continued to grow at a healthy rate led by strong demand in rural and recovery in urban markets. Modern trade and institutional business continued to lag led by lower footfalls in stores, offices schools, railways etc.
Gross margin expanded for the third consecutive quarter driven by deflationary raw material cost and cost optimization. We continue to maintain our positive outlook on the stock. We have marginally trimmed our estimates based on management guidance. Our revised TP stands at Rs 4,564 (vs previous TP of Rs 4,747). We maintain Buy."
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