At a time when India’s consumer sector is showing early signs of uneven demand, Nomura has named four companies as its key picks. The brokerage firm stated that while consumer companies delivered a steady March quarter, the rising input costs, weather risks and income disruptions have the possibility to make the forthcoming quarters volatile.
Against this backdrop, Nomura has identified Godrej Consumer Products, Tata Consumer Products and Titan as its key picks.
Here is a detailed analysis of the investment rationale driving the call –
Top picks: Titan, Tata Consumer, GCPL lead the pack
Nomura has identified Titan, Tata Consumer Products and Godrej Consumer Products as its preferred bets, citing stronger execution and pricing power.
Titan is expected to deliver the strongest growth in the discretionary segment, with revenue seen rising about 47% year-on-year, driven by jewellery growth of over 50%. That said, the brokerage cautions that elevated gold prices could start weighing on footfalls and volumes.
Tata Consumer Products is seen sustaining broad-based momentum, with its salt business expected to grow 12% and its newer “growth businesses” continuing to expand at 25–30% plus, the report said. Godrej Consumer Products, meanwhile, is expected to hold margins in the 24–25% range, helped by low-cost palm oil inventory and a relatively resilient portfolio, the brokerage firm stated.
Upside candidates: Nestle, Britannia may surprise
Among other large-cap names, Nomura sees scope for positive surprises from Nestlé India and Britannia.
According to the report, Nestlé is expected to post healthy volume growth of around 11%, alongside a meaningful improvement in margins as lower raw material costs flow through. Britannia, too, could see a sharp pickup in profitability, with EBITDA growth pegged at around 20%, supported by softer input costs and improved consumption following GST-led price cuts, the report noted.
Under pressure: Dabur, Colgate, United Spirits
According to the brokerage firm, Dabur could see its consolidated growth slow to around 4.5%, weighed down by geopolitical disruptions in its Middle East and North Africa business, even as its India operations remain steady. Colgate-Palmolive is expected to report margin pressure from an inverted duty structure, leading to a marginal decline in operating profit.
The brokerage firm further noted that United Spirits may continue to see volume declines, with additional pressure on margins from rising glass costs linked to LPG shortages, which are expected to play out from the June quarter.
Sector watch: Price moves and cost pressures return
Paint companies such as Asian Paints and Berger Paints have already announced price hikes of about 8% from April. In contrast, Marico has cut prices in its Parachute portfolio, including a 17% reduction in its 500ml SKU, the report noted.
ITC is entering a more challenging phase, with cigarette volumes expected to decline by about 3.5% after recent tax-led price hikes of over 30%. EPL, however, stands out for its relatively insulated margin profile, with about half its business operating on a pass-through basis, the report noted.
Nomura’s broader takeaway is that the consumer sector is moving into a phase where broad-based tailwinds are fading, and performance will increasingly depend on company-specific factors.