Bank of America (BofA) has released its views on the Indian consumer sector ahead of the March quarter results, naming Titan Co., United Spirits Ltd., and Marico Ltd. as its top picks. The brokerage firm has flagged caution on Avenue Supermarts Ltd. (DMart), citing earnings and valuation pressures due to heightened competitive intensity.
According to BofA, several companies in the consumer sector are exhibiting double-digit topline momentum, including Marico, Varun Beverages Ltd., United Spirits, and Tata Consumer Products Ltd. However, the firm notes that DMart is facing challenges, while other companies in the sector are showing stable trends but lack a meaningful recovery.
The firm expects Indian consumer companies to follow similar trends to the previous quarter, with year-on-year growth rates remaining largely unchanged across both staples and discretionary segments. BofA predicts around 7% year-on-year Ebitda growth and flat to moderate revenue gains for most names in its coverage.
One of the main challenges facing the sector is pricing growth in staples, which is improving but still trailing earlier forecasts. Cost pressures are also affecting margins across the board, excluding alcoholic beverage companies. Despite these challenges, BofA remains optimistic about Titan Co., United Spirits Ltd., and Marico Ltd., which have demonstrated strong momentum and are well-positioned for long-term growth.