Britannia Industries shares: Upside capped for FMCG stock, says Elara Securities

Britannia Industries has been downgraded to a 'Reduce' rating by Elara Securities, following a 14% rally in the company's stock over the past three months. Despite this downgrade, Elara revised its target price for Britannia to ₹5,710, up from ₹5,200. The move reflects concerns over limited upside potential in the near term as the company focuses on volume share and profitability.

In Q4FY25, Britannia reported an 8.9% year-on-year increase in sales to ₹4,430 crore, driven by a 3.5% rise in volume. This performance aligns with Elara Securities' expectations. The company has witnessed a sequential recovery in demand, with further gradual improvement anticipated into FY26. Britannia's management has expressed confidence in maintaining a stable market share.

Britannia has expanded its distribution network, now reaching approximately 2.9 million outlets, up from 2.8 million in FY24. The company has also increased its rural distribution with 31,000 distributors, compared to 30,000 in the previous year. E-commerce channels contributed 4% to overall sales, showcasing a 7.4x growth compared to other channels.

The company has implemented price hikes in Q4, leading to a 5.5% difference between volume and value growth. Britannia expects to sustain its current margin with an EBITDA margin reported at 18.2% for the quarter. The company remains prepared to adjust pricing strategies based on commodity trends and competitive pricing.

Looking ahead, Britannia anticipates double-digit revenue growth in FY26. This optimism is despite a temporary impact on volume due to inflationary cycles. The company's new route-to-market initiatives in urban outlets have yielded positive early results. Britannia is also strengthening its innovation pipeline, including the relaunch of its cake and cheese portfolio with improved recipes and packaging.

Elara Securities has adjusted its earnings estimates for Britannia, raising them by 2% for FY26 and 4% for FY27, factoring in higher revenues from strategic pricing and better-than-expected margins. The focus remains on sustaining profitability while navigating ongoing challenges in the inflationary environment.

The company's strategic efforts to align with regional tastes and accelerate premiumisation are expected to support its growth objectives. With its continued expansion and innovation strategies, Britannia aims to maintain its competitive edge in the market.