Life can be unpredictable. In the case of Britannia Industries Ltd, things are looking up post-covid, in stark contrast to its prospects pre-covid. A year ago, in its Q1FY20 earnings conference call, Varun Berry, managing director, Britannia, had said there may be some serious issues with the economy if the consumer was thinking twice before buying even a 5 product. A year later, while the country’s economic situation has worsened led by the unprecedented covid-19 crisis, Britannia is having its moment in the sun. In-home packaged food consumption has increased as Indians spent more time at home during the pandemic.

In its Q1FY21 earnings call on Friday, Berry said: “We used to have 11 days of stock, today we have 2-3 days inventory.” As an analyst with a domestic institutional brokerage said: “Basically, demand is so much that they are unable to meet it.”

Good times

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Good times

Ahead of its June quarter results announcement, Britannia shares touched a new 52-week high. And the numbers didn’t disappoint. Britannia’s consolidated operating revenue growth of 26.4% is already better than analysts’ gung-ho expectations. For instance, JM Financial Institutional Securities Ltd and Jefferies India Pvt. Ltd had estimated Britannia’s June quarter revenue growth at 22.6% and 22%, respectively. The packaged foods company is expected to clock the best revenue growth for Q1FY21 among consumer firms. The rusk and bread categories grew faster than the company’s overall growth, according to Britannia. In these business conditions, overall volume growth of 21.5% is impressive to say the least. The balance revenue growth was helped by a combination of pricing and product mix.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) margin expanded by 634 basis points year-on-year to 20.96%. One basis point is one-hundredth of a percentage point.

This was helped by a marginal decline in other expenses and a much slower pace of growth in employee costs. As such, Ebitda increased by a whopping 81.7% over the same period last year to 717 crore. The good run may well continue. Britannia doesn’t think the growth rate is accelerating any further, but it’s not seeing a significant downtrend in growth numbers either, it said on the call. Besides, the company said inter-corporate deposits to promoter entities have been maintained sequentially. Sure, that’s a worry, but with growth rates being where they are, high valuations could well find some support.

Currently, the Britannia stock trades at a valuation multiple of around 54 times trailing 12-month earnings. Of course, the moot question is whether Indians will continue snacking on biscuits as the covid-19 impact subsides. The answer to that question will determine Britannia’s fortunes, going ahead.

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