In the brokerage's coverage universe, it expects superior revenue growth (in double-digits) from Marico, Tata Consumer and Godrej Consumer, while Colgate could witness a decline. For paint companies, it expects better QoQ volumes combined with higher realizations but adverse mix to result in low topline growth. Expects Berger Paints to deliver relatively better growth vs Asian Paints or Kansai Nerolac.
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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 -
pricing power in key categories,
potential to gain market share from small/local players, and
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 -
easing consumer pricing and
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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