Kotak Institutional Equities forecasts resilient growth for consumer staples in the June quarter, supported by stable margins. In contrast, discretionary sectors show varied performance, with strong demand in jewelry and paints against potential volume pressure in tobacco and packaged foods.
Consumer companies are preparing for the June quarter earnings season with a divided outlook between staples and discretionary segments. According to projections from Kotak Institutional Equities, the consumer staples space is expected to maintain steady growth, bolstered by the effective management of inventory costs and strategic pricing decisions.
Staples and Discretionary Performance Trends
The brokerage anticipates that several major consumer staples will deliver robust organic revenue growth. Honasa Consumer is projected to lead the segment with 22% growth, followed by Marico at 20% and Nestlé India at 19.3%. Other established players, including Godrej Consumer Products, Tata Consumer Products, Colgate-Palmolive India, Hindustan Unilever, Dabur, and Britannia Industries, are expected to see revenue growth ranging between 9.5% and 12.5%. These companies appear to be benefiting from stable input costs, which are helping to protect profit margins.
In the discretionary category, the performance outlook is more uneven. Investors tracking Titan Company Limited may note an expected 39% year-on-year surge in domestic Tanishq jewelry sales, which is projected to drive a 31% increase in jewelry segment EBIT. Pidilite Industries is also positioned for a strong quarter, with revenue growth estimated at 18%. However, other areas of discretionary spending face challenges. ITC Limited is expected to face pressure, with cigarette volumes potentially falling by 9% following tax-led price increases. This shift in consumer behavior could impact the company's net revenue and EBIT. Similarly, Jubilant FoodWorks is anticipated to report weaker earnings compared to its peers.
Factors Influencing Profitability
While profit margins remain a key focus for investors, the sector overall is not expected to see major year-on-year volatility in EBITDA margins. Companies have relied on a combination of price adjustments and the use of low-cost inventory to maintain profitability. Additionally, many firms have moderated their advertising spending, which has provided further support to their bottom lines.
For investors, the primary monitorables will be how companies manage volume growth in a high-inflation environment and whether the projected demand in jewelry and paints sustains beyond the current quarter. Future updates on raw material costs and consumer appetite for higher-priced discretionary items will be essential to understanding whether these companies can maintain their current margin stability through the rest of the financial year.