Festive Season Surprises? Morgan Stanley Expects Urban Plays To Outperform In Last 45 Days Of Q2
The brokerage believes that early festivities could favor urban plays and could turn out to be the best festive season of the past five years.
Morgan Stanley believes that the last 45 days of the current fiscal year’s second quarter (since August 15) may have changed the growth trend across consumer companies versus the first 45 days of the quarter with the most negative impact for FMCG companies versus retailer over discretionary companies.
“We believe early festivities could favour urban plays and FBQ could turn out to be the best festive season of the past five years,” the brokerage said.
However, it noted these three things were not in their numbers.
The possibility of a positive swing in demand post the GST change for discretionary and retail businesses.
Commentary from FMCG companies (HPC and F&B) could be muted vs. market expectations.
The conversation around competitive intensity and market share changes could be more meaningful starting this quarter in the paint sector.
The brokerage also noted that measures are in place to shift growth from being "just incremental" even though Q2 results are likely to still relay the incremental narrative.
Sectoral Break-Up
Apparel: Sequential Growth Improving
Morgan Stanley expects Trent's fashion revenue to grow by 25% YoY, up from 20% in Q1FY25, signalling an improving growth trajectory. In Q2FY25, the company added six new Westside stores and 31 Zudio outlets.
For Page Industries, volume growth is expected at 5%, up from 2% in Q1FY25, reflecting a gradual recovery. Both ABFRL and Aditya Birla Fashion (ABLBL) are also expected to show sequential improvement in revenues with stable YoY margins.
Jewellery: Mixed Signals
Morgan Stanley projects Titan’s standalone jewellery business to grow 12% YoY, despite a high base in the previous year. While the customs duty cut may provide a short-term boost, higher gold prices could dampen consumer sentiment. Over two years, the implied CAGR stands at 18%, indicating moderate long-term growth.
Value Retail
For DMart, Q2FY25 revenue is expected to grow 18% YoY, aided by a weak base in Q2FY24. Ebitda margins are expected to remain steady at 7.6%.
Vishal Mega Mart is projected to maintain its strong 20% revenue growth, with same-store sales growth trends improving to over 10%, highlighting continued consumer traction in the value segment.
New Age Companies
The momentum from Q1 is likely to continue for digital-first companies. FSN E-Commerce Ventures (Nykaa) is expected to sustain a strong 25% growth in its beauty segment.
Brainbees (FirstCry) is projected to deliver 9% multi-channel growth, slightly ahead of 8% in Q1FY25, reflecting continued strength in omnichannel execution.
Quick Service Restaurants
Jubilant FoodWorks is forecast to post 16% revenue growth with 8% SSSG in Q2FY25. Margins are expected to remain sequentially stable, indicating consistent operational performance.
Paints
In the paints category, industrial growth is expected to be relatively stronger. Asian Paints (APNT) is likely to see the weakest growth among peers.
Berger Paints is likely to gain relative market share, although the pace of gains may moderate, according to channel checks.
