Marico, Godrej Consumer, Berger Paints — Systematix Top Stock Picks In Consumer Staples; Q1 Results Preview

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Systematix Report

With valuations still low versus historical averages, but stocks appreciating over the past few months, we prefer stocks with -

1. pricing power in key categories,

2. potential to gain market share from small/local players, and

3. relatively better growth tailwinds in operating segments.

We prefer Marico and Godrej Consumer in staples, Berger Paints in paints and Dodla Dairy in small/ midcaps.

Looking ahead, we expect gradual sequential improvement in volume demand on the back of -

1. easing consumer pricing and

2. ongoing distribution/ salesforce expansion from most companies.

We expect margins to improve every quarter successively as raw material costs ease, the gap between realizations vs input-cost inflation narrows and operating leverage improves with some demand recovery.

However, brand/ salesforce/ reach/ trade spends would sustain at high levels with not much let-up in competitive intensity.

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