India's consumer companies are experiencing an unusually strong earnings season, with business updates from jewellery, retail, and household goods firms mostly beating expectations. According to Manoj Menon, Head of Research and Consumer Analyst at ICICI Securities, this represents what he called an 'outlier' quarter in which almost every consumer company has performed well. The brokerage noted that most of the Godrej Consumer Products are considered consensus positive, highlighting the broad-based strength across the sector. Recent developments show this momentum continuing, with Dabur India reporting 5% revenue growth to ₹13,193 crore and 7.2% profit increase to ₹1,895 crore for the fiscal year, demonstrating the sector's resilience despite global uncertainties.
Menon favours staples over discretionary consumer stocks at the moment, not because discretionary businesses are performing poorly, but because staples have lagged and now offer better value after a period of underperformance. Within staples, Marico is his preferred pick over Hindustan Unilever, with Menon noting that Marico's business is performing well but its shares now trade at roughly a 12% premium to Hindustan Unilever — a valuation gap he said has 'never happened in the history' of the stock. The firm also expects Honasa Consumer to benefit from improving demand and forecasts that it could deliver its first double-digit revenue growth in nearly three years if consensus expectations are met.
ICICI Securities is constructive on the alcoholic beverages industry, citing supportive policy changes by state governments and continued growth opportunities for domestic players. The brokerage prefers Indian companies such as Berger Paint and Allied Blenders & Distillers over Colgate, believing local companies are better placed to sustain growth momentum. Paint makers have raised prices by 12-15% even as raw material costs have fallen, with decorative paint companies implementing staggered 14-16% price hikes to offset input cost inflation driven by elevated crude oil costs and a depreciating rupee. Recent developments show hopes of de-escalation in the West Asia war bringing Brent crude oil prices down to $75-80/barrel from over $100/barrel, with the Indian rupee gradually appreciating and supply chain constraints for importing crude-based raw materials easing.
For the June quarter (Q1FY27), paint companies under coverage are expected to deliver aggregate revenue growth of around 13%, with Asian Paints and Berger Paints India each clocking 9% year-on-year volume growth. According to Systematix Shares and Stock Broking, which covers around 70% of industry sales, price hikes implemented during the quarter are expected to support revenue growth despite slower volume offtake. However, higher costs of monomers, titanium dioxide, and packing materials are likely to push sequential raw material procurement costs higher, with Asian Paints and Berger potentially seeing gross margins contract by 120-140 basis points year-on-year and 350-400 basis points sequentially. The slower volume offtake reflects soft consumption of discretionary items, though primary demand outpaced secondary demand with rural consumers deferring repainting amid inflationary pressures.
Menon's top largecap pick in the paints space is Asian Paints, while among smaller names he favours Indigo Paints and JSW Paints. For investors with no existing consumer exposure, he pointed to three key angles: bottom-up picks such as Jubilant FoodWorks and Radico Khaitan, selected on company fundamentals rather than sector themes; alcoholic beverages described as being in a 'Goldilocks' moment thanks to more rational policy changes by state governments; and contrarian, value-oriented bets in quick-service restaurants, a sector he said is 'completely beaten down' and under-followed despite no clear evidence yet of a turnaround.
Despite current margin pressures, paint companies could wait for the benign crude cost trend to sustain before reducing selling prices in phases, with ICICI Securities expecting them to initially increase influencer spends, trade spends, and schemes before resorting to price cuts only after the key season of Diwali. If prices are not cut, it could lead to gross margin expansion in H2FY27 as high-cost inventory typically takes a quarter to get absorbed. Competitive intensity remains elevated, with companies fighting for sales growth ahead of the crucial festive season in the second half of FY27. According to PL Capital, dealer migration appears to have largely stabilized as the trade incentive gap between Birla Opus and Asian Paints narrowed sequentially, while JSW-Akzo has set an aggressive target to emerge as the second-largest decorative paints player over the medium term.
