SECTOR UPDATE
Q3FY2020 Consumer Goods results preview
Q3 to be another soft quarter
A sustained slowdown in rural demand will continue to affect performance of consumer goods companies with revenue growth expected to sustain at 0-5% in Q3FY2020; Revenue of Sharekhan consumer goods universe is expected to grow by 6% y-o-y.
Margin profile to remain mixed with food companies such as Britannia Industries and GSK Consumer Healthcare expected to see lower margins due to inflation in input prices, while companies such as Hindustan Unilever (HUL), Marico and Dabur India would continue to see margin expansion.
Reduction in tax rates to boost earnings of Q3 and subsequent quarters; revival in domestic demand for consumer products will take another two quarters; sustenance of the same has to be keenly monitored.
Preferred picks: HUL, Colgate-Palmolive (India), Godrej Consumer Products and Varun Beverages.