(%) Margins (%) Britannia Industries (BRIT) has been aided by a confluence of positive factors, such as high in-home consumption (biscuits constitute 82% of sales), reduction in ad spend, decline in material cost, and low promotional spend (owing to strong demand). However, this extraordinary earnings growth in FY21 presents a significant hurdle from an FY22/FY23 perspective as none of these factors present a structural positive. Furthermore, material costs could result in high volatility in earnings for BRIT it has one of the lowest gross margins among peers (40% in FY20). While we like the structural story, expensive valuations (47.5x FY22), sustained concerns of elevated group inter-corporate deposits (ICDs) at around INR6b (similar to 4QFY20 when they crossed their own stated threshold of INR5b), and an uncertain earnings outlook beyond FY21 have led us to maintain our rating. Standalone sales grew 24.8% YoY to INR32.3b.