Britannia Industries Limited (BIL) is an Indian company specialised in the food industry. The company is a part of the Wadia Group which is headed by Nusli Wadia. The company was founded in 1892 by a group of British businessmen with an investment of ₹295. The company is headquartered in Kolkata. It is one of India’s oldest companies and is renowned for its biscuit products.
Britannia Industries is one of India’s leading food companies with a 100-year legacy having annual revenues leading ahead of Rs 9000 crore. Britannia is among the most trusted food brands, and manufactures India’s favourite brands like Good Day, Tiger, NutriChoice, Milk Bikis and Marie Gold which are common household names in India. Britannia’s product portfolio includes Biscuits, Bread, Cakes, Rusk, and Dairy products including Cheese, Beverages, Milk and Yoghurt which are sold throughout India and internationally.
Quarterly Growth Walkthrough
The revenues from operations have grown by 21 percent year on year with the support of a 4 percent growth in volumes and a price hike by 18 percent year on year in the second quarter. The company has taken a progressive increase in price by about 25 percent in the period between July 2021 and October 2022.
| Particulars | Sep 2022 | Jun 2022 | Sep 2021 | QoQ | YoY |
| Sales | 4,380 | 3,701 | 3,607 | 18.3% | 21.4% |
| Expenses | 3,668 | 3,200 | 3,049 | 14.6% | 20.3% |
| Operating Profit | 712 | 501 | 558 | 42.1% | 27.6% |
| Net Profit | 491 | 336 | 382 | 46.1% | 28.5% |
| EPS | 20.48 | 14.01 | 15.95 | 46.2% | 28.4% |
Gross profit and margins have both grown with the support of price hikes and cheaper prices of palm oil. Flour and milk prices have been exorbitantly high. The operating profit was greater by an amazing 27 percent with the aid of an increase in gross profit. The employee cost and other expenses have expanded by 6 percent and 30 percent respectively.
BIL has endured an accruing inflation of 32 percent over the previous 7 quarters, while undergoing a collective price hike of about 22 percent. Wheat flour prices have risen by 25 percent, industrial fuel prices have spiked by 40 percent, and palm oil is expensive by 40 percent year on year.
Notable Highlights
Britannia has relentlessly pursued to secure the market share from its two largest competitors (Parle and Nestle). BIL has taken a lead ahead of Parle Products in the past two quarters. The company gained market share over FY21 was on a multiple of 1 time considering on an all-India basis, and it was on a multiple of 1.5 times for rural areas. BIL has an 18 percent market share in Uttar Pradesh in comparison with 11 percent which was 7 years ago.
During the second quarter, the company has given support to its newer products, which are Treat croissant, NC Seeds & Herbs, Biscafe, Potazos, 50-50 Golmaal, Marble cake and Rs 5 Muffils, nation-wide and through advertisement channels.
Biscafe, which was deployed in June 2022 has given a revenue growth of 3 times QoQ, while NC seeds, herbs and protein has shown a growth of 2.5 times QoQ.
50-50 Golmaal, which has been deployed into Bihar, Jharkhand and Odisha, have outperformed with an 85 percent growth QoQ.
Treat Croissant was deployed on a national level in September 2022 and has given a revenue growth of 70 percent QoQ and about 250 percent growth YoY.
Marble Cake, which was deployed across India saw a 2 times revenue growth QoQ.
Cheese wafers were launched in June 2022 and were expanded to the western region. This product has given an annualised revenue of greater than Rs 15 crore.
Distribution has been spread across the rural markets as the company has increased their rural dealers from 27,000 in Q1 to 28,000 in Q2 in the current fiscal year.
The new dairy factory in Maharashtra has been commercialised in October 2022 but higher milk prices have given constraints onto profitability.
As of 30 September 2022, the Inter-corporate deposit (ICD) which is possessed by promoters has fallen down to Rs 590 crore which was at Rs 740 crore in March 2022.
Long-term debts have increased from Rs 707 crore in March to Rs 1710 crore in September this year. The fund will be deployed in the dairy plant at Ranjangoan and for the upcoming capex at factories in Tamil Nadu and Uttar Pradesh. The effective interest rate is 5.8 percent and the treasury yield is about 8.5 percent.
Technical Analysis
Britannia stock price has achieved its 161.8% retracement level target. The shape of the candles shows the inherent bullishness and the price is trying to make a break over this level. The price has overextended above its 200-day moving average which makes it highly expensive. Weekly MFI is at 85 points which confirms that the stock is overbought and the price is expensive.
We may soon witness a correction into this stock, and it is a good candidate into short trades for intraday traders. The stock made a big gap up on 7th November 2022 (marked by yellow box) after the declaration of the splendid second quarterly results. Hence the short direction target for Britannia stock is at Rs 3804 which might be achieved in the coming weeks.
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