Ahead of the earnings season, domestic brokerage Prabhudas Lilladher expects margins of consumer companies to bottom out in Q2 with sequential margin expansion in H2 due to price hikes being absorbed and softening commodity prices.
“Valuations remain high given rural demand slowdown and RM volatility. However, festive demand in Q3 & low base for rural in H2 provides some comfort in the near term,” it said.
The brokerage has a buy ratings on the following consumer stocks:
The brokerage has a buy rating on Asian Paints with a target price of Rs 3,446, a potential upside of nearly 3.26% from the current market price of Rs 3,337. The brokerage expects 18% volume growth in the company, led by strong demand. The brokerage also expects gross margins to remain stable sequentially due to multiple rounds of price hikes and 310 bps improvement YoY. It expects EBITDAM of 17.6%.
Prabhudas Lilladher has a buy rating on Avenue Supermarts with a target price of Rs 5,118, a potential upside of nearly 14.34% from the current market price of Rs 4,476.
D’Mart is expected to deliver revenue growth of 38% YoY and 7% sequentially on the back of strong festive demand and no hiccups from any Covid wave. Gross margins are expected to improve marginally by 16 bps to 15.1% and EBITDA margins are likely to improve by 42 bps to 9% YoY. Net profit is expected to rise by 46% YoY, the brokerage said.
The brokerage has a buy rating on Jubilant FoodWorks with a target of Rs 688, potential upside of nearly 8.56% from the current price of Rs 633.75. Prabhudas Lilladher expects revenue to grow by 16%, driven by strong numbers in both the delivery and dine in segments. The company’s gross margins/EBITDA to contract by 70/60bps QoQ on prolonged commodity inflation despite price hikes, and adjusted PAT is expected to decline 4.1% YoY.
Prabhudas Lilladher has a buy rating on the stock with a target of Rs 847, a potential upside of nearly 17.84% from the current market price of Rs 718.75. The brokerage expects revenue to grow by 48%, driven by improved throughput and a favourable base. The company’s gross margins to contract marginally by 50 bps YoY, while EBITDAM to improve by 130 bps QoQ.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
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