Britannia's investors need a volume treat

Overall, the company expects gross margin to hover around FY23 levels of about 41% in the coming quarters. Ebitda margin is likely to taper from the highs seen in Q4 and moderate to full-year FY23’s margin of about 17.5%.

- Vineetha Sampath, Pallavi Pengonda

Packaged foods company Britannia Industries Ltd has put up a strong show on the margin front for most of the financial year 2023. Investors have acknowledged this, taking its shares up as much as 42% in the past year.

“With the company delivering better-than-expected financial results during FY23, Britannia’s earnings expectations got reset. Thus, valuations of the stock got re-rated," said Amnish Aggarwal, head of research at Prabhudas Lilladher. For perspective, according to Bloomberg data, the one-year forward price-to-earnings multiple stands at nearly 47 times now versus 40 times at the beginning of FY23, Aggarwal explained.

After facing margin pressure for several quarters, Britannia’s consolidated Ebitda margin has expanded year-on-year continuously in the past three quarters. The strong margin performance in recent quarters was led by a confluence of factors such as price hikes, cost efficiency measures and a fall in commodity costs.