n Volume-led revenue growth. Britannia reported revenue growth of 27.5% yoy; volume growth of 20% and the remaining growth stemmed from price hikes. Consolidated revenue was up 26% yoy. Revenues of subsidiaries grew only 11% yoy.

n Lower EBITDA margin. EBITDA margin was 380bp lower yoy. Raw material cost as a percentage of net sales rose to 65.9% in 2QFY11 from 60.4% in 2QFY10. With a higher income-tax rate and increase in interest cost post-debenture issue, net profit was down 49.8% yoy. Consolidated net profit slipped 52%.

n Outlook. Though Britannia's revenue growth is intact, we believe its pricing power continues to be pressured. With the mounting competition, Britannia is unable to pass on the higher raw material prices to end-consumers. Further, as the subsidiaries continue to suffer losses, we are cautious about earnings growth ahead.

n Valuation and risks. We retain our Sell on Britannia, with a target price of `313, based on a target PE of 20x FY12e earnings. Our target PE is at a 25% premium to the 12-month forward Nifty PE. Upside risks are lower raw material prices and better pricing power