Britannia shares tumble 4% after Q2 earnings miss estimates. Should you buy, sell, or hold?

Shares of FMCG player Britannia Industries tumbled 4% to an intraday low of Rs 5,220 on the BSE after the firm reported a 10% year-on-year (YoY) decline in its consolidated net profit at Rs 531 crore in the quarter ended September 2024. This was reported at Rs 588 crore in the year-ago quarter.

However, its revenue from operations rose 5% YoY to Rs 4,668 crore in the second quarter, compared with Rs 4,433 crore in the same quarter of last year.

Both profit and revenues were below the Street expectations of Rs 630 crore and Rs 4,769 crore, respectively.


On a sequential basis, consolidated sales grew 11% while the profit after tax rose 5%.

The company reported an 8% volume growth during the second quarter and the management said the sequential increase in revenue and operating profits are satisfactory results in the face of severe commodity inflation leading to a tepid consumer demand scenario in most FMCG categories.

In the context of a steep rise in prices of key commodities such as Wheat, Palm, Cocoa, etc, the company said it demonstrated agility in initiating focused pricing actions and identifying new levers for cost optimization across the value-chain.

As a result, it maintained a healthy operating margin of 15.5% during the quarter.

Should you buy, sell, or hold Britannia's stock? Here's what analysts say:

Investec

Investec maintained its 'Hold' rating on Britannia Industries, setting a target price of Rs 5,770.

The brokerage noted that margin challenges persist for the company. Britannia's consolidated revenue growth of 5% was in line with expectations. However, Investec anticipates further margin contraction ahead and suggests that an earnings cut is likely.

Goldman Sachs

Goldman Sachs maintained a 'Neutral' rating on Britannia Industries, with a target price of Rs 5,350.

The brokerage highlighted that Q2 results were significantly below estimates. While volume growth was in the high-single-digit range, revenue growth lagged behind. Additionally, EBITDA margins declined sharply, and Goldman Sachs noted that input cost pressures are expected to rise in the second half of FY25.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)