Bank CEOs meet with Trump to discuss Fannie Mae and Freddie Mac - Bloomberg
On Friday, HSBC analysts revised their stance on Britannia Industries Ltd (NSE:BRIT:IN), downgrading the stock from a ’Hold’ to ’Reduce’ rating, while simultaneously increasing the price target to INR 4,980 from INR 4,750. The adjustment reflects the analysts’ view on the company’s market position and growth prospects.
Britannia Industries, known for its dominance in the biscuits category with approximately a 40% market share in 2024, has seen a significant turnaround in its margin profile over the last decade. Nevertheless, the company’s market share gains in the biscuits segment are slowing, and the potential for further margin expansion appears limited according to HSBC.
The future growth of Britannia is now believed to hinge on its performance in product adjacencies such as bread, rusk, and cakes, which currently make up about 25% of the company’s standalone revenues. However, HSBC points out that Britannia’s execution in these non-biscuit segments has been lackluster, with its market share in these categories remaining static at approximately 25%.
HSBC’s report indicates that there is no significant improvement on the horizon for Britannia in terms of market share or margin expansion. The analysts have projected a compound annual growth rate (CAGR) of 9% for revenue and 12% for profit after tax (PAT) over the fiscal years 2025 to 2027. This forecast is a slight increase from the 8% CAGR for both revenue and PAT over the fiscal years 2024 to 2027.
The valuation of Britannia by HSBC is based on a 45 times multiple of the company’s forecasted FY27 earnings per share (EPS), which is below the five-year average price-to-earnings (PE) multiple of 48 times. This valuation underpins the revised price target of INR 4,980. Despite the increased target, the downgrade to ’Reduce’ suggests caution regarding the stock’s potential for appreciation.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.