Consumer-facing companies are expected to deliver a healthy set of earnings in the June quarter, driven by resilient rural demand, strong jewellery sales, improving quick-service restaurant (QSR) trends and robust paints demand, according to PL Capital. The brokerage has retained an 'Overweight' stance on the sector and continues to prefer Titan Company and Britannia Industries among its top investment ideas. PL Capital expects its consumer coverage universe to report revenue growth of 11.2% YoY, Ebitda growth of 4.9% YoY, and profit growth of 4.2% YoY during Q1 FY27. Recent brokerage reports indicate that retailers are set for robust performance in Q1FY27, supported by healthy consumer demand, store expansion and strong jewellery sales, despite cost pressures.
According to PL Capital's analysis, the demand outlook remains cautious due to likely impact of El Nino and monsoon activity, but easing crude prices will provide a tailwind for consumer companies. The jewellery sector is expected to post strong double-digit value growth in Q1, supported by elevated gold prices, despite prices correcting by around 20% from their peak levels. PL Capital notes that excluding ITC, the consumer coverage universe sees significantly stronger growth across sales, Ebitda and profit metrics. This suggests that while ITC may face challenges, the broader consumer sector is positioned for solid performance in the upcoming quarter.
Despite the positive sector outlook, PL Capital has issued mixed recommendations across its coverage universe. The brokerage has assigned 'Buy' ratings to four consumer stocks while maintaining its cautious stance on ITC, issuing a 'Reduce' rating for the company. Recent reports suggest that value retailers such as V-Mart are expected to benefit from improving demand in smaller towns, supported by same-store sales growth and continued store expansion, while premium players like Ethos are likely to sustain growth momentum. However, Bata faces tepid sentiment at the bottom end, which could lead to another quarter of sluggish sales growth.
