Consumer companies' topline growth hits 20-year low: Jefferies
Advertisement
Revenue growth of consumer discretionary companies in India has hit a 20-year low and they are expected to report weak earnings for the December quarter as the consumption pattern for products across all categories remains sluggish, says a report.
Discretionary companies includeautomobiles , luxury goods and high-end retail, among other categories.
"Earnings expectations have been tempered across the sector, more so for discretionary companies and to a lesser extent for the large staples companies. Expectations over the next few years are now considerably lower than historical growth rates," the American brokerageJefferies said in an earnings preview report, without quantifying it.
"Discretionary consumption is unlikely to worsen from here, and we are yet to see strong signs of recovery," the report said, adding thatFMCG companies are faring slightly better now but they still face further risks from the deepening rural and low-end consumption down cycle.
The report also warned of deflationary trends saying revenue growth forconsumer companies has been under pressure for several quarters, now the biggest worry is the deflationary trends setting coupled with weak volume growth.
"In real terms, though, FMCG segments seem to be faring better than discretionary categories, where growth has now dropped even below historical lows. While one might wish to bank on the resilience of FMCG, past data suggest that nearly all consumer companies suffer badly in a prolonged slowdown of the kind we are witnessing now," the report added.
Against the backdrop of a weakening rural and low-end consumption cycle, risks to FMCG growth seem significantly high, it said, adding that the only solace being the benign commodity prices, which has boosted profitability for consumer companies.
"This is particularly true for paints and the smaller FMCG firms that have grown earnings far ahead of the sector in recent quarters. Margin gains in paints could likely sustain given the nature of the industry," it said.
However, it is cautious on the margin trajectory for the smaller FMCG companies, as it expects them to pass on the benefits of benign commodity in a weak demand scenario. The report also noted that despite lingering slowdown, valuations for companies continue to be high.
(Image credit: Economic Times)
Advertisement
Discretionary companies include
"Earnings expectations have been tempered across the sector, more so for discretionary companies and to a lesser extent for the large staples companies. Expectations over the next few years are now considerably lower than historical growth rates," the American brokerage
"Discretionary consumption is unlikely to worsen from here, and we are yet to see strong signs of recovery," the report said, adding that
The report also warned of deflationary trends saying revenue growth for
Advertisement
Against the backdrop of a weakening rural and low-end consumption cycle, risks to FMCG growth seem significantly high, it said, adding that the only solace being the benign commodity prices, which has boosted profitability for consumer companies.
"This is particularly true for paints and the smaller FMCG firms that have grown earnings far ahead of the sector in recent quarters. Margin gains in paints could likely sustain given the nature of the industry," it said.
However, it is cautious on the margin trajectory for the smaller FMCG companies, as it expects them to pass on the benefits of benign commodity in a weak demand scenario. The report also noted that despite lingering slowdown, valuations for companies continue to be high.
(Image credit: Economic Times)
Advertisement
- US buys 81 Soviet-era combat aircraft from Russia's ally costing on average less than $20,000 each, report says
- 2 states where home prices are falling because there are too many houses and not enough buyers
- A couple accidentally shipped their cat in an Amazon return package. It arrived safely 6 days later, hundreds of miles away.
- India Inc marks slowest quarterly revenue growth in January-March 2024: Crisil
- Nothing Phone (2a) India-exclusive Blue Edition launched starting at ₹19,999
- SC refuses to plea seeking postponement of CA exams scheduled in May
- 10 exciting weekend getaways from Delhi within 300 km in 2024
- Foreign tourist arrivals in India will cross pre-pandemic level in 2024
- JNK India IPO allotment date
- JioCinema New Plans
- Realme Narzo 70 Launched
- Apple Let Loose event
- Elon Musk Apology
- RIL cash flows
- Charlie Munger
- Feedbank IPO allotment
- Tata IPO allotment
- Most generous retirement plans
- Broadcom lays off
- Cibil Score vs Cibil Report
- Birla and Bajaj in top Richest
- Nestle Sept 2023 report
- India Equity Market