Growth in consumer goods space is set to be muted for yet another quarter (October-December 2024), according to Mirae Asset Sharekhan, who attributed it to sluggish urban demand, a gradual recovery in rural demand and price hikes taken across product categories.
The just-concluded quarter witnessed a sustained slowdown in urban consumption owing to elevated inflation and lower job opportunities, while rural growth has outpaced urban growth.
The international business revenue growth is expected to be moderate due to the currency depreciation, the financial services firm said in a report.
Revenues of companies that are tracked by Mirae Asset Sharekhan are expected to grow by 6 per cent year-on-year supported by price-led growth in most companies, while volume growth is likely to be in low single-digits.
“We expect our consumer goods universe to post 7 per cent year-on-year profit after tax decline due to muted revenue growth and contraction in margins.”
“Prices of most key inputs were high in Q3, which will affect gross margins. Further, higher ad spends and negative operating leverage would keep operating profit margin lower year-on-year,” read the report.
With high commodity prices (particularly in the agri basket) and insufficient price hikes, gross margin is expected to see pressure for most categories/companies.
Demand will continue to be muted in Q3 with rural growth outpacing urban growth for another quarter. The monsoon was above normal and well spread out, it will help better agri produce. This too will boost rural consumption and help agri inflation to stabilise soon.
In the near term, it expects revenue growth to be driven by a mix of volume and price-led growth and operating profit growth to be lower as compared to the revenue growth.
For NBFCs and diversified financials too, sluggish growth is expected.
Loan growth in NBFCs continues to moderate for most players. Net interest margins would be a mixed bag, while credit costs would stay high.
“Loan growth slowdown would continue for most NBFCs in our coverage. Unsecured personal loans and MFI loans would continue to see calibrated growth and elevated stress. For vehicle finance, demand in the commercial vehicle segment is still muted however passenger vehicles, tractors and used vehicles are showing signs of recovery.”
For insurers, despite regulatory changes, the report expects annual premium equivalent (APE) growth to remain healthy for its universe.
