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MOSL: MOrning India (5/August/22): 1. Britannia Industries (Volumes and margins disappoint in 1QFY23; Downgrade to Neutral); 2. Bulls & Bears; 3. Avenue Supermarts; 4. Dabur; 5. Godrej Consumer

 

MOrning India (5/August/22): 1. Britannia Industries (Volumes and margins disappoint in 1QFY23; Downgrade to Neutral); 2. Bulls & Bears; 3. Avenue Supermarts; 4. Dabur; 5. Godrej Consumer

Today’s top research idea

Britannia Industries: Volumes and margins disappoint in 1QFY23; Downgrade to Neutral

• After displaying resilience in 4QFY22 volumes despite steep price hikes, BRIT's 1QFY23 result was disappointing with a low single-digit volume decline.
• With further price increases likely in 2QFY23 (cumulative 6-7% price hike in 1HFY23), the effective price hike will be ~20% YoY. This might delay the eventual volume recovery, especially in a price sensitive category like biscuits.
• BRIT's 1QFY23 EBITDA margin was also notably lower than expectations at 13.5% (a level last seen in 4QFY15).
• Even though we estimate FY24 EBITDA margin to recoup to 16%, BRIT's valuation is rich at 48.1x FY24E P/E given the tepid earnings CAGR of 11.7% over FY22-24E.

We, therefore, downgrade BRIT to Neutral targeting 45x Jun'24E EPS, giving us a TP of INR3,670

Piping hot news

Retail auto sales for July fall by 8% to 14.7 lakh units: FADA

Vehicle registrations, a proxy for retail sales, fell in July — a traditionally weak month for automobile sales as Indian consumers usually postpone taking delivery of big-ticket items to the upcoming festive season. According to data available with the Federation of Automobile Dealers’ Association (FADA), 1,436,927 vehicles across segments were retailed in July, a decline of 7.84% from a year earlier. Sales were, in fact, 19.92% lower when compared with the pre-Covid month of July 2019.