Urban Shoppers Expected To Boost Earnings At India’s Top Consumer Firms
Urban consumption was further lifted by a boom in retail loans.
(Bloomberg) -- Earnings at India’s top consumer firms will be powered by growing urban consumption, while rural demand continues to hang in the balance ahead of national elections.
Reliance Industries Ltd., which makes most of its income from its flagship petrochemicals business, has recently deepened its foray into the retail sector, which is poised to be its fastest-growing segment. Urban consumption was further lifted by a boom in retail loans. That probably also aided credit growth at top lender HDFC Bank Ltd. before the central bank clamped down on such lending in November.
While Reliance’s retail business is more exposed to the urban consumption boom, Hindustan Unilever Ltd.’s earnings may hint at a recovery in the country’s rural sector — a key piece of the economic puzzle before India holds national elections in mid-2024.
While slow volume growth at consumer goods firms has been attributed to struggling rural demand, some companies have recently pointed to a recovery outside urban areas. “With supportive macros in 2024, such as lower inflation, replenishment of rural savings and increase in liquidity due to election spending, we expect low-ticket mass consumption categories to see improvement,” analysts at Nomura said.
Meanwhile, Taiwan Semiconductor Manufacturing Co.’s fourth-quarter revenue beat estimates of a decline, paving the way for better growth from artificial intelligence-driven demand.
Highlights to look out for:
Saturday: Avenue Supermarts (DMART IN), which operates the Dmart chain, may see quarterly profit jump 19% as it added five new stores and optimized existing ones. The company recorded 17% revenue growth, it said in a pre-earnings update. Citi analyst Ashish Kanodia cautioned about a lower proportion of apparel sales hurting unit economics at its supermarkets, after similar headwinds crimped earnings in the previous quarter.
Tuesday: HDFC Bank (HDFCB IN) is set for 28% higher quarterly profit on robust credit growth, led by commercial and rural lending. While India’s central bank in November raised risk weights on retail loans, the banks still saw an almost 14% increase in the segment, according to analysts at Nomura. With the recent takeoff in retail lending, commentary on retail slippages will be closely watched.
Wednesday: Asian Paints’ (APNT IN) quarterly profit may grow by over a fourth, buoyed by wedding season demand and a delayed festival season. Its margins are also expected to expand thanks to favorable raw material prices, according to analysts at Kotak Institutional Equities.
Thursday: TSMC (2330 TT) is poised for a strong rebound this year, with revenue likely soaring 22% in 2024. The company has said last year’s sales fell 4.5% to NT$2.16 trillion ($69.4 billion). Estimates compiled by Bloomberg show quarterly net income probably fell 24%. The revenue growth in 2024 will be led by inventory restocking and strong AI demand on its N5 nodes, JPMorgan said. Demand for AI training should remain solid and edge AI would be a key monitoring point for any further revenue upside, according to Goldman Sachs.
Friday: Billionaire Mukesh Ambani’s Reliance Industries (RELIANCE IN) may report quarterly earnings on Friday. Its mainstay oil-to-chemicals business probably remained weak due to poor refining margins, but growth in its retail and digital services units means the conglomerate is set for 20% profit growth. Reliance Retail, helmed by heiress Isha Ambani and valued at over 8 trillion rupees ($96.3 billion), has been adding stores, recently bought Sephora’s India operations and launched beauty retail brand Tira. It’s expected to be Reliance’s fastest-growing segment in fiscal 2025.
- Hindustan Unilever’s (HUVR IN) third-quarter revenue is expected to grow at its slowest pace since January-March 2020, according to consensus estimates. This could be partly due to weaker-than-expected festival period performance and price cuts in its laundry portfolio, in addition to high inflation weighing on coffee demand, analysts at Kotak Institutional Equities said. Its gross margin is also expected to expand from a year earlier because of lower palm oil costs, according to analysts at Motilal Oswal.
--With assistance from Felix Tam and Shwetha Sunil.
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