A GST-driven margin surprise and accelerating sales has brokerages agree the growth story has legs
Britannia Industries is back in a sweet spot. The country’s largest biscuit maker delivered a margin performance in Q3FY26 that surprised even optimistic analysts, while a new chief executive has arrived with an ambitious agenda of brand investment, inorganic acquisitions, and a clear battle plan against the regional players quietly nibbling at Britannia’s market share.
New Boss Change the Script
The December quarter’s 9.5% year-on-year revenue growth to Rs 49.7 billion understates the real momentum. The story is what happened after October — a month disrupted by the transition to new GST-adjusted price points — when incoming MD and CEO Rakshit Hargave disclosed that November and December sales accelerated sharply.
“Incoming MD and CEO Mr. Rakshit Hargave highlighted sales growth of approximately 12% over November-December, driven by equal contribution from volume growth and realizations post GST-cut,” Systematix noted in its report.
The competitive texture matters here. When the GST on biscuits was reduced, Britannia moved quickly to restore higher grammage at the psychologically important Rs 5 and Rs 10 price points. Several regional rivals held on to odd price points of Rs 4.45 and Rs 8.90, letting the retail trade pocket the difference and gain volumes in certain geographies. With the industry expected to fully normalise MRP points by end of Q4FY26, Britannia sees a volume recovery coming.
Margins Touch a Four-Year High
The operating performance was the unambiguous standout of the quarter. Gross margin expanded approximately 450 basis points year-on-year to 43.3%, with wheat, palm oil, sugar, cocoa, and laminates all stabilising or correcting. EBITDA margins touched nearly 20% — a level not seen in 22 consecutive quarters.
“Consolidated EBITDA increased significantly by approximately 16% year-on-year at Rs 9.8 billion against an estimate of Rs 8.7 billion,” Nirmal Bang wrote, noting that adjusted profit after tax rose nearly 17% to Rs 6.8 billion — a 12% beat on the bottom line.
Hargave signalled meaningful reinvestment into brand building, advertising and promotion, e-commerce and quick commerce capabilities, and adjacencies. Systematix has remained conservative, building in only approximately 25 basis points of annual EBITDA margin expansion through FY28.
The New CEO’s Playbook
Hargave’s priorities are clear — efficiencies in sales, distribution, and supply chain; elevated brand investment; and driving innovation across adjacencies and future platforms. The regional competition angle is particularly important. Britannia faces pressure from local players who aggressively pass on commodity benefits, regional competitors developing localised formats, and a broader competitive threat concentrated in East India.
The inorganic growth signal is new and significant. Management specifically indicated that the initial buildup in functional foods — especially under the Nutri Choice platform — would not happen entirely organically. This flags potential acquisition activity ahead.
On digital channels, the company currently derives high single digits of sales from e-commerce and quick commerce, with management targeting early teens contribution by FY27. The adjacencies business, spanning dairy, cakes, and salted snacks, is estimated at approximately 20% or more of total sales, posting strong double-digit growth across most categories with cheese and dairy remaining work in progress.Where Analysts Part Ways
Systematix maintained its Hold rating, arriving at a revised target price of Rs 6,785 based on 51 times December 2027 estimated earnings — in line with the stock’s five-year historical average. The firm raised FY26 to FY28 EPS estimates by 4 to 8% but stayed cautious.
“We await visibility of structural growth and margin expansion beyond the near term. Stock trades at P/E of 49x on FY27E EPS,” Systematix said plainly.
Nirmal Bang has upgraded the stock to Buy with a target price of Rs 7,135 — implying 21.5% upside from current levels — valuing Britannia at 53 times December 2027 estimated earnings, a 10% premium to the 10-year average multiple.
“After strong beat on profitability in 3QFY26 results, improved momentum in sales in the last two months, likely benign material costs and promising initiatives under the new CEO, we have upgraded our EPS forecasts for FY26 and FY27 by approximately 8% and 3% respectively,” Nirmal Bang said. The brokerage projects earnings per share growth of 14.3% over FY26 to FY28 — substantially higher than the preceding five-year period — with return on equity potentially accelerating to the late 50% level as operating leverage kicks in from already-expanded capacity. Of course, the stock is also riding the wave of the GST cuts and Varun Berry’s strategic inputs for now.
