CLSA has trimmed the FY20 revenue growth forecast for consumer staples (ex-ITC) from 11.5 percent to 8.4 percent, leading to a decline in earnings growth forecast to 10.8 percent from 13.6 percent.
Britannia has the highest earnings cut of 7 percent while Marico has a slight upgrade, CLSA said in its latest report, which reviews Q1FY20 for sectors like financials, telecom and consumption.
The consumer sector witnessed moderation as the staples revenue growth moderated to an eight-month low. However, in comparison to auto sales, staples did well, CLSA said.
“Q1FY20 revenue for staples grew the slowest in the past eight quarters at 6 percent YoY. Barring Nestle, every single firm reported single-digit revenue growth. However, margins benefitted from the adoption of Ind-AS 116,” the firm stated.
For discretionary, however, Q1 revenue growth was relatively better at 13 percent YoY, said the report. The growth was mainly led by Asian Paints (17 percent YoY) and Titan (14 percent YoY).
"We raised earnings of paint companies mainly due to strong growth in decorative and positive surprise on gross margins," the report added.
Overall, the research house has a cautious commentary on the consumer sector but is hopeful of a recovery in H2.
First Published: Aug 20, 2019 9:03 AM IST
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