EUR 120.00 For Business Accounts Only

MOSL: CONSUMER 1QFY22 PREVIEW: Staples demand resilient; some margin pressure evident

CONSUMER 1QFY22 PREVIEW: Staples demand resilient; some margin pressure evident

 

1QFY22 is likely to report strong cumulative growth numbers of ~19% on the topline, ~23% on EBITDA, and ~25% on PAT for the 18 consumer companies under our coverage. A large portion of this growth is likely to be the result of the low base – cumulative sales/EBITDA/PAT had collapsed ~17/~29/~23% due to regional lockdowns affecting both the supply chain and manufacturing. While the second wave impact this year was more pervasive, these critical factors held up well for staples – companies are likely to report revenue growth not just v/s 1QFY21 but 1QFY20 as well. In-home consumption, hygiene product sales, the spurt in healthcare products, and (by and large) continued good rural demand are likely to contribute to growth in staples. On the other hand in case of discretionaries, on-trade sales numbers would be a long way off from 1QFY20 sales because of store closures. Consequently, while discretionary companies would show extremely strong revenue growth YoY, this would still be far below 1QFY20 sales. With the ongoing gradual unlock and going by trends observed in FY21, discretionary companies are set to witness a strong rebound over the remainder of the year – provided a) India does not see a third COVID wave, b) the vaccination pace remains healthy, and c) the pandemic’s impact on incomes/wealth is contained. Despite the continued impact on discretionary demand for the quarter, cumulative sales decline v/s 1QFY20 is likely to be only ~2%, while cumulative EBITDA decline is likely to be ~12% – primarily attributable to a) much lower discretionary sales, b) ongoing material cost pressures, and c) high sequential ad spends in staples.