More Stories

Informist, Friday, Jan. 10, 2025

MUMBAI – Nomura Global Markets Research expects consumer companies' volume growth to remain range-bound and below the long-term average in 2025 due to weak demand in urban areas and the absence of any catalyst for improvement. The research firm expects the growth in volumes to remain frail in the first half of 2025, but said it will show some cyclical improvement in the second half. 

Given the sharp inflation in raw material prices, companies have started taking price hikes, though at rates lower than commodity inflation, Nomura said. Consumer companies will continue to undertake price hikes in 2025, but will do so gradually to avoid volume shock, it said. This will support growth in the overall sales value in 2025 compared with 2024, when companies cut prices for most of the year. 

However, Nomura expects expansion of margins in 2025 to be limited as companies might avoid "flexing strong pricing power", given weak consumer demand. Rather than prioritising margin expansion, consumer companies will focus on driving growth in volumes and market share. While competitive intensity could increase in the distant future, in the near term, it is seen helping consumer companies as more premium end products are being sold, leading to higher margins. In discretionary consumption, Nomura said premium categories are expected to do well in 2025 due to their inelastic demand. 

The research firm expects organised players to gain back market share from regional or unorganised players. Inflation is generally good for organised companies, as unorganised players end up taking higher price hikes, thus lowering the price premium gap between them, Nomura said. 

Consumer companies concentrated in rural areas are expected to deliver better growth in volumes compared with their urban counterparts, given the improvement in rural demand, Nomura said. In the paints segment, Nomura expects volumes to see a cyclical recovery in 2025 on a favourable base. 

"Consumers stocks have undergone sharp corrections in recent months due to the below-than-expected demand environment and continued earning cuts," Nomura said. With inflation expected to moderate, GDP expected to improve, and price hikes expected to improve value growth, Nomura sees risk-weighted sector valuations at reasonable levels.

Nomura said it expects those companies to stand out that have the least exposure to inflationary commodities, have pricing power, are diversifying their product portfolios and markets, are stepping up launches, and are investing in digital capabilities. It said it prefers Marico Ltd., Hindustan Unilever Ltd., and ITC Ltd.

For 2025-26 (Apr-Mar), the volumes of staples companies are expected to grow 5.5% on year, while their sales and earnings before interest, tax, depreciation, and amortisation are expected to rise 10% and 12%, respectively, Nomura said. The operating margin for the staples companies is expected to grow 45 basis points on year. Volumes, sales, and EBITDA for paint companies are expected to grow 11% each in FY26, while their operating margins are seen flat. 

In 2024, demand for staples from low-income households and rural areas had improved after three years of subdued demand, Nomura said, adding that demand from middle-income households and urban areas was muted in the second half of the year due to low growth in wages and high inflation. 

For FY25, the volumes for staples companies will likely grow 3% on year, while their sales and EBITDA are seen up 5.5% and 4%, respectively. The operating margin for the staples companies is expected to contract 25 basis points on year. For FY25, the volumes and sales of paint companies will likely grow 5% and 5.5%, respectively, whereas their EBITDA and operating margin will likely fall 10% and 210 basis points, respectively, Nomura said. 

Price hikes made a comeback after raw material inflation picked up in the second half of 2024, but put the gross profit margins and volumes of consumer companies under pressure. Nonetheless, organised players kept their advertising spending high to recover market share lost in 2023 from unorganised and regional players, Nomura said.  End

Reported by Steffy Maria Paul

Edited by Namrata Rao

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.