We expect aggregate revenues to decline marginally while EBITDA/PAT is likely to decline 5-6% year-on-year impacted by demonetisation. We expect discretionary companies (jewelry, paints and Page) to perform relatively better while we model volume decline across staples. RM headwinds (especially in agri-inputs) and negative leverage are likely to lead to EBITDA margin contraction across companies (barring select few) despite A&SP cuts. We retain our ‘tread selectively’ stance; preferred picks going into Q3FY17 earnings are ITC, CLGT, BRIT and BJCOR.
We expect Q3FY17 to be a dismal quarter as aggregate revenue and EBITDA/PAT for KIE consumer universe (ex-ITC/Nestle) are likely to decline by 0.2% and 5-6%respectively. Overall, we expect discretionary companies within our universe to perform relatively better (ex-alcohol) – we estimate aggregate revenues for discretionary companies to grow 1.5% year-on-year.
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We expect jewelry (led by strong festive season), paints (low single-digit volume growth) and (6-7% volume growth) to perform relatively better.
At a company level, we expect all companies except Titan, TGBL and SHK to post EBITDA margin contraction and 13 companies to witness 100 bps + contraction. Only 8 out of 23 companies under our coverage are likely to post GM expansion. Overall, we expect only 5 companies to register positive growth in PAT – Nestle (low base), Titan, Page, TGBL and GCPL.