Consumer Sector Q4 Results Preview - Demand Trends Are Yet To See A Major Revival: DRChoksey

DRChoksey Research Report

Our consumer coverage universe is expected to see a muted revenue growth of 4.2% YoY/ 4.8% QoQ in Q4 FY24E. There has been no material change in the demand environment compared to Q3 FY24 despite a moderation in consumer price index inflation in the quarter.

Lower crop yields post a below-normal monsoon have had lingering effects on rural demand. While there have been signs of revival in rural demand, indicated by an uptick in two-wheeler sales, a significant uptick in FMCG sales remains to be seen.

The gap between urban and rural growth may continue to narrow gradually. FMCG players will continue to see a growth disparity between premium and mass segments, with premium growing stronger than the bottom end.

Topline growth will be led by Varun Beverages Ltd. (+19.1% YoY) due to strong demand and distribution plus capacity expansion, Tata Communications (+16.5% YoY) due to its ‘Growth businesses’ and premiumization in the base business, and Devyani International Ltd. (+10.2% YoY) due to store additions while same-store sales growth will remain weak.

Laggards in terms of revenue growth include Adani Wilmar Ltd. (-4.0% YoY) due to a decline in edible oil prices, Hindustan Unilever Ltd. (-2.1% YoY) and Britannia Industries Ltd. (+1.8% YoY) both due to subdued demand and grammage additions/ price cuts.

Ebitda margin performance will be a mixed bag, with margins growing by 35 bps YoY (-12 bps QoQ) for the coverage. Ebitda growth for the coverage is expected to be 5.9% YoY/ 4.3% QoQ while net profit growth is expected to be 4.1% YoY/ 3.1% QoQ.

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