Staples likely to outperform discretionary pack; revenue and Ebitda/PAT growth of 12% and 20-22% expected
Low base (due to GST-led destocking) is likely to drive strong-to-spectacular revenue/earnings growth (on reported basis) for most companies, but what enthuses us is the initial signs of revenue/volume pickup even on adjusted 2-year CAGR basis. Price-led growth is likely to remain muted; however, we expect GST anniversarisation and surge in inflation to drive higher price-led growth in ensuing quarters. Overall, we expect our consumer universe to report revenue and Ebitda/PAT growth of 12% and 20-22%, respectively, (higher growth ex-ITC).
We expect Staples universe to outperform discretionary pack this quarter due to relatively weaker performance of retail companies (high base, advancement of sales season pre-GST). High operating leverage (low base), cost saving initiatives and GST-tailwinds are likely to drive margin of most companies.
Low base to drive strong-to-spectacular earnings growth for most companies on reported basis
We expect our consumer universe to post strong 20-22% aggregate Ebitda/PAT growth (higher 27-30% growth in both Staples and discretionary ex-ITC) aided by aggregate 170 bps expansion in Ebitda margin (not strictly comparable due to GST-led accounting changes). Staples is likely to witness higher 220 bps margin expansion led by 90 bps GM expansion, flattish A&P (leverage and media spend optimisation) and leverage gains (low base); we expect Jyothy, Emami, Nestle, GCPL and Dabur to post stronger Ebitda growth. In discretionary (model 160 bps margin expansion, ex-ITC), we expect JUBI, Westlife, Page and APNT to post strong Ebitda growth. We expect 18 out of 20 companies in our consumer universe to post Ebitda margin expansion (barring Marico and Varun Beverages); nearly 11 companies to post 150 bps expansion.
Outperformers and laggards
Within Staples, low base (some companies were more impacted by GST-led disruption vs. others) is likely to drive higher reported growth for companies like Jyothy and Emami; however, on adjusted basis, we expect HUL, Nestle, Britannia, GCPL and Colgate (led by margin expansion, volumes remain weak) to report robust earnings growth. In Discretionary, we expect QSR (both JUBI/Westlife), Page and paint companies to post good performance. Key laggards for the quarter include Shoppers Stop (high base), Marico (Saffola drag, higher copra consumption costs) and ITC.