Gross margin expanded 273 bps YoY (flattish quarter-on-quarter), aided by moderate inflation in the prices of key raw materials.
EBITDA margin, while benefiting from gross margin expansion, was partially offset by higher other expenses (29 percent YoY). The latter could also be due to aggressive advertising/promotion campaigns in recent times backing new launches (cakes/croissant portfolio) and World Cup campaign.
Britannia remains a beneficiary of distribution reach catch up with the nearest competitor Parle and other FMCG players. Its rural exposure remains in the low 20 percent of sales, but is expanding rapidly – 26 percent increase in dealership. It is witnessing super normal growth in northern states – double-digit sales growth in the last three years. Having said that, the management's commentary on 'slowdown in market place in the recent months' should be closely watched in the near term.
The stock has already corrected by around 11 percent from its CY19 high and now trades at a reasonable multiple of 50 times its FY20 estimated price-to- earnings
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