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Prabhudas Lilladher Report
We estimate our coverage universe to report sales, Ebidta and profit after tax growth of 8.7%/11%/10.9% YoY on 45 basis points Ebidta margin expansion.
Demand conditions in rural India and mass segment remain sluggish while premium products are doing better. Margin expansion will be led by low input costs. Asian Paints Ltd., Kansai Nerolac Paints Ltd., Colgate-Palmolive Ltd., Pidilite Industries Ltd. and Nestle India Ltd. will have strong profit. quick service restaurant (Jubilant Foodworks Ltd., Westlife Foodworld Ltd. and Burger King) will report decline in profits.
Staples demand and sentiments remained under pressure amid sustained inflationary pressure and slower than expected rural recovery, however urban markets remained resilient.
Winter products saw lower consumption due to soft onset of winter season. We expect staples to post low to midsingle digit volume growth in Q3 FY24.
Demand across discretionary categories like QSR, footwear and retail remained under pressure amid moderate festive season. QSR had volatile quarter with strong demand on specific occasions and tepid normally.
Paints gained from robust festive and wedding season which leading to strong volume growth while organised Jewellery players gained share and grew despite sluggish industry demand due to higher gold prices.
We remain positive on discretionary segments structurally, however recent stock price movements leave little scope for further re-rating in near term. We believe valuation in most staple companies’ factors in recovery in rural demand, softer commodity basket and margin expansion.
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