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Prabhudas Lilladher Report
We estimate our coverage universe to report sales, Ebitda and profit after tax growth of 7.9%/6.9%/5.1% YoY on 20bps Ebitda margin contraction. Staples demand conditions remain tepid while rural recovery is happening at a slow pace. Quick service restaurant’s continue to face rising competition and downtrading in an inflationary environment, more so in dine in segment.
Discretionary segments like eyewear, watches, footwear are no better with pressure on volumes. Paints continue to grow albeit at a slower pace. Staples are grappling with weak demand and rising competition from regional/smaller players.
We expect low- to mid-single digit volume growth and little realization growth. FMCG spends are not reflecting the strength in GDP growth on account of shift in consumer wallet share and preferences.
Demand across discretionary categories like QSR, footwear and retail remain under pressure. Same-store sales trends continued to remain weak despite low base. Paints witnessed a weaker than expected quarter amid rising competition while organized Jewellery players grew in wedding season even as higher gold prices impacted demand towards end of Q4.
We believe current valuations in most consumer names offer little scope of re-rating given current context of single digit topline growth and elevated margins.
We like Titan Company Ltd., Avenue Supermarts Ltd., Pidilite Industries Ltd., Westlife Foodworld Ltd., Nestle India Ltd. and Britannia Industries Ltd. structurally, however we would wait for better prices or time correction for a fresh entry.
ITC Ltd. and Hindustan Unilever Ltd. offer a trade given correction in stock prices.
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Also Read: Consumer Durables Q4 Results Preview - Southern India To Drive Cooling Products Growth: Nirmal Bang
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