BRITANNIA

eyes volume growth amidst demand reversal

Q1 FY26 Performance: Total operating revenue grew by 9% year-on-year (y-o-y) to ₹4,622 crore, but this was primarily driven by price hikes. Volume growth decelerated for the third consecutive quarter to a disappointing 2%, falling short of analyst estimates. Margin Pressure: The company's consolidated Ebitda margin shrank by 135 basis points (bps) to 16.4%, continuing a four-quarter trend of y-o-y margin decline. The gross margin also dropped by 310 bps to 40.3%, largely due to high commodity prices for refined palm oil, cocoa, and flour. A key factor impacting the Ebitda margin was a ₹52 crore hit from the company's phantom stock option scheme, which contributed to a 20% y-o-y rise in employee costs. Margin Recovery: The sequential easing of prices for some key commodities is an encouraging sign. Analysts believe this, along with recent price hikes, will help set the stage for margin expansion in the coming quarters. Nomura Financial Advisory and Securities has raised its earnings-per-share forecast for FY26-28. Demand and Market Share: Rural markets continued to show strong double-digit growth, outperforming urban areas. While overall market share remained flat, segments like rusk, wafers, and croissants saw good traction. Despite a distribution restructuring in the East, which caused some disruption, the company's focus states registered robust growth. Future Expectations: Investors will be closely watching the pace of recovery in volume and margins. Analysts expect volumes to improve and overall sales growth to reach double digits in FY26, driven by an overall pickup in FMCG consumption and recent price hikes.