Q2FY19 will finally be a comparable quarter as GST comes in the base. Underlying demand trends are stable, however, some impact can come in due to Kerala floods, below normal monsoon and late festive season. Margin impact of inflationary trends should be minimal in Q2 but is expected to be high in H2 despite price hikes. Among our coverage, we believe BRIT, HUVR, ITC, JUBI and NEST should see a healthy operating performance in Q2.
Base for most of the consumer companies has normalised in Q2FY19 and hence growth will taper off when compared to Q1FY19. Growth can also be impacted by a lower-than-expected recovery in the CSD channel and lower inventory in the wholesale channel. Only BRIT is expected to see a double-digit volume growth (12% y-o-y) this quarter while Dabur, HUVR and GCPL each are expected to see steady ~9% y-o-y volume growth. Marico, Colgate and Emami will be laggards with 6%, 5% y-o-y growth and a 4% y-o-y dip in volumes, respectively. Patanjali impact seems to be waning, ergo we expect some market share gains for Colgate in toothpaste.
We expect paint companies to witness a high single-digit volume growth, APNT is expected to clock a 8% y-o-y volume growth in Q2FY19 on a base of 9% y-o-y, impacted by the late festive season. Strong run for QSRs should continue, JUBI can see a SSSG of 20% y-o-y on a base of 5.5% y-o-y, also aided by Everyday Value Offer in small size pizza. In the jewellery segment, Titan’s growth should be steady at 18% y-o-y (on a high base of 36%).
Excluding Emami (higher ad spends and lower operating leverage), MRCO (impacted by high copra prices) and UNSP (high base; 57% y-o-y ebitda growth in Q2FY18), we expect all other companies in our coverage to see an ebitda margin improvement, aided by favourable base and cost-saving initiatives. However, we expect margin pressures in Q3 onwards with higher RM pressure and INR depreciation.