Emkay Global
Target: ₹4,500
CMP: ₹3,551.50
Revenue growth moderated to 12 per cent and was slightly below estimates. However, earnings momentum remained strong at 23 per cent, beating estimates by 6 per cent, led by strong margins from cost efficiencies.
Despite production of full portfolio reducing manufacturing efficiency and mix gains vs Q1, margin expansion was higher than expected, which points to strong cost efficiencies that are likely to sustain. Gross margins expanded 180 bps (40 bps q-o-q), while EBITDA margins rose 370 bps. Softer input prices and higher costs savings may offer upsides ahead.
With unlocking, tailwinds from in-home consumption seem to be declining. However, Britannia still offers a healthy growth outlook, given its strong portfolio expansion and execution, along with improved demand trends in rural areas.
We reduce our FY21-23 estimates by about 4 per cent, factoring in low interest income after the high dividend payout. Valuations at 44x FY22 still appear reasonable, given the strong earnings outlook. We maintain Buy with a target price of ₹4,500, rolling forward to December 2022 EPS.