Indian consumer staples companies are likely to deliver another quarter of improving performance despite multiple rounds of price hikes, according to Citi, which remains constructive on the sector heading into the June-quarter earnings season. While maintaining a positive view on the sector, Citi prefers Food & Beverages over Home & Personal Care, adding that demand trends and earnings visibility remain stronger in the former.
Its top stock picks are Tata Consumer Products, Godrej Consumer Products and Britannia Industries, while it remains cautious on ITC, Colgate-Palmolive (India) and United Breweries.
Key Drivers
Among individual companies, Citi expects Hindustan Unilever to post around 10% revenue growth, driven by pricing and stable volumes, although EBITDA margins are likely to remain near the lower end of the company's guidance range.
For Godrej Consumer, the brokerage expects 12% revenue growth and 14% EBITDA growth, aided by strong volume growth led by its 'Speedboats' strategy and moderate pricing gains in India.
Varun Beverages is expected to report another robust quarter, with 25% revenue growth and 17% consolidated volume growth, supported by continued demand momentum.
Citi also expects Tata Consumer to post 12% consolidated revenue growth, although domestic tea volumes could remain under pressure due to the impact of extreme summer heat. Britannia is expected to see sequential improvement with 8% revenue growth and 9% EBITDA growth, while Marico is likely to continue its strong run following its recent business update, with Citi modelling 10% volume growth, 21% revenue growth and 22% EBITDA growth.
The brokerage expects volume growth to remain resilient even after 2–5% price increases, supported by easing commodity costs and a recovery in demand. With input cost pressures beginning to moderate, Citi believes the need for further pricing actions is now limited, making the way for healthier volume growth in the second half of FY27.
Citi said investors should closely monitor management commentary on the evolving El Niño situation, rural demand trends and competitive intensity. The brokerage also expects lower commodity costs to reduce the need for additional price hikes, which could help sustain demand recovery and support earnings growth across the FMCG sector.
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