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Q4FY19 results will be near-normal for consumption space, says CLSA

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CLSA expects Q4FY19 to be near-normal, though there is a slight impact in the base due to GST tax rate cut.

Q4FY19 results will be near-normal for consumption space, says CLSA
Brokerage firm CLSA on Thursday said it expects Q4FY19 to be near-normal for consumption space, though there is a slight impact in the base due to Goods and Services Tax (GST) rate cut.
Since demonetisation, the consumer sector has not witnessed a single quarter of normalised base, CLSA said.
"The consumption trends and management commentary are signaling slowdown due to weak sentiment, liquidity issues, delayed winters etc. For staples, expect revenue growth to decelerate to less than 10 percent YoY in Q4," it said.
Furthermore, CLSA added that volatility in input cost remains a worry despite mixed trends, thus expect staple EBITDA (earnings before interest, taxes, depreciation, and amortization) margins to remain almost flat YoY.
“Dabur (weak rural, delayed winter), Godrej Consumer Products (weak international) and Emami should show weak trends, while Marico and Nestle should grow revenue strongly,” it said.
Meanwhile, growth rates should be modest for Varun Beverages and United Spirits due to delayed winters, the brokerage firm said, adding that the quarter should be strong on growth for Westlife Development, Asian Paints, Titan and Jubilant Foods.
“Margin expansion for Marico (copra price decline), Hindustan Unilever (price hikes, premiumisation), Colgate will be offset by Dabur (higher staff), Godrej, Emami (weak demand) and Nestle (high advertising, promotion cost)”, it added.
Hence, commentary on rural growth and pricing strategy in the context of rising input prices is important as competitive intensity is high, CLSA said.
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