Bank of America has released a report on the Indian consumer sector, highlighting its top picks and areas of concern ahead of the March quarter results. The brokerage has named Titan Co., United Spirits Ltd., and Marico Ltd. as its top picks, while expressing caution on Avenue Supermarts Ltd. The report highlights that Marico, Varun Beverages Ltd., United Spirits, and Tata Consumer Products Ltd. are among the companies showing double-digit topline momentum. However, it flags that DMart is facing earnings and valuation pressures due to heightened competitive intensity.
The report notes that broader trends in the Indian consumer space remain stable, but a meaningful recovery is still elusive. Bank of America expects the sector to witness similar trends as last quarter, with largely unchanged year-on-year trends across staples and discretionary segments. The brokerage expects around 7% year-on-year Ebitda growth and flat to moderate revenue gains for most names in its coverage.
The report also highlights that pricing growth in staples is improving, but is still trailing earlier forecasts, and cost pressures are hurting margins across the board, excluding alcoholic beverage companies. Overall, the report suggests that Bank of America remains selective on the consumer sector, with a focus on companies that are showing strong growth momentum and are better equipped to navigate the challenging market conditions.