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market | IST

Britannia a long-term bet; Dabur, HUL, Nestle top picks in sector: Edelweiss Securities

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Abneesh Roy, Executive Director - Institutional Equities at Edelweiss Securities, believes Britannia continues to look good on a long-term basis. He further mentioned that Dabur India, HUL and Nestle are their top picks in the sector.

Britannia Industries reported its Q2FY22 numbers on Monday. The company posted marginally better revenue but reported a 26-quarter low gross margin and a 10-quarter low EBITDA margin. The company reported a net profit of Rs 381.8 crore for the quarter ended September 2021, missing Street estimates by a wide margin. Its net profit fell 22.9 percent on a year-on-year basis. The company reported revenue of Rs 3,607.4 crore for the second quarter of the current financial year, up 5.5 percent on a year-on-year basis.
Despite the company missing Street estimates, Abneesh Roy, Executive Director - Institutional Equities at Edelweiss Securities, believes Britannia continues to look good on a long-term basis.
Roy believes Britannia is likely to gain market share in biscuits and also expand in cakes, wafers and salty snacks. However,  he mentioned that the stock could be under some pressure in the near-term.
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“The margins were clearly below our estimates. In our recent note on Britannia, we had highlighted that because of the palm oil and cashew prices, there will be pressure on the gross margin and the EBITDA margin,” he said.
Hindustan Unilever Ltd (HUL) and Nestle have done better than Britannia in terms of managing margins, Roy noted.
He prefers two themes - companies which are more into out-of-home consumption, with a more diversified basket and also where there is some cooling off in some of the raw material prices.
“So our top picks will be Dabur India, HUL and Nestle,” he said.
In the discretionary consumer basket, Roy likes PVR, Inox Leisure, Titan, Trent, Asian Paints.
“We prefer PVR, Inox, Titan, Trent in the discretionary space,” he mentioned.
For the full interview, watch the accompanying video.
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