On Monday, JPMorgan (NYSE:JPM) analyst Latika Chopra upgraded Britannia Industries Ltd (NSE:BRIT:IN) stock rating from Neutral to Overweight, with a revised price target of INR5,530, up from INR5,270. The change comes after observing the company’s stock performance relative to the market and the fast-moving consumer goods (FMCG) sector over the past six months. During this period, Britannia’s shares fell by 15%, while the NIFTY index saw a smaller decline of 3%.
Chopra’s analysis indicates that Britannia’s gross margin hit its lowest in the third quarter of the fiscal year 2025 but is expected to improve. This anticipated improvement is attributed to price hikes and sustained cost measures. Despite increased competition, Britannia managed to maintain its market share throughout the first nine months of the fiscal year 2025, with the company’s share actually increasing by the end of the third quarter.
Britannia’s volume growth, especially in its core biscuits portfolio, has been robust, outperforming most of its peers with a 6.4% increase in the third quarter, and a 5.5% rise in biscuit sales specifically. This success is partially credited to the company’s distribution initiatives, which include revamping urban go-to-market strategies, a high rate of innovation, and a focus on states where Britannia’s market share is less than half of its national share.
The company’s expansion into adjacent categories such as cakes, rusks, croissants, wafers, and dairy has also been highlighted as a profitable venture that is contributing positively to the company’s growth. Furthermore, a reduction in capital expenditure intensity is expected, with a projection of INR2 billion per annum compared to the INR6-7 billion per annum spent from fiscal years 2022 to 2024, which should improve free cash flow.
JPMorgan forecasts a 14% compound annual growth rate (CAGR) in earnings per share (EPS) for Britannia Industries from the fiscal year 2025 to 2027. This optimistic outlook is based on the company’s solid execution on the ground and its strategic initiatives, which are anticipated to support continued revenue growth and margin expansion.
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