Consumer Discretionary Q3 Results Preview - Weak Demand; Sequential Margin Recovery: ICICI Direct

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ICICI Direct Report

Our consumer discretionary universe is likely to report muted volume offtake of ~2-8% (barring pipe companies) in Q3 FY23. The lower volume offtake of paints and fast moving electric goods is attributable to unfavorable base, weak rural demand and slow inventory build-up of winter related home appliances.

Plastic piping companies, on the other hand, are likely to report strong volume growth of 22-34% YoY, supported by dealer inventory buildup amid stabilising PVC prices.

On the margin front, the Ebitda margin is likely to recover ~300 basis points QoQ supported by easing raw material prices. However, on a YoY basis, the margin is likely to remain lower by ~100 bps due to higher advertisement expenses and low operating leverage.

As a result, universe’s bottomline is likely to be flat on a YoY basis. We expect a demand recovery to kick in from Q4 onwards on easing inflationary pressure and fresh inventory build-up of seasonal products.

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