Nomura sees earnings growth of consumer staples cos moderate to 5.5% in Q2
This story was originally published at 17:14 IST on 8 October 2025
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MUMBAI – Nomura expects the Indian consumer staples sector to report moderate growth in revenue for the September quarter due to the goods and services tax rate cut transition resulting in temporary de-stocking. The revenue for Jul-Sept is expected to grow 5.5% year on year, lower than 6.6% growth in the previous quarter but above the eight-quarter average of 4.7% on year.
The brokerage firm said GST rationalisation impacted the overall sales growth of consumer staples companies by 2–4% in Jul-Sept. It expects the gross margin of companies to improve sequentially largely due to the benefits of lower raw material prices, but higher spend on advertisements is likely to limit operating margins.
Nomura expects lower product prices following GST cuts in late September to be available in general trade in 2-3 weeks after the implementation of new rates, likely around mid-October, due to inventory in the channel. However, this will be available in modern trade in the first week of October, the brokerage said. "We believe re-stocking in trade will happen fully in Oct/Nov with STR (sell-through rate) coming back to normalised levels and boosting sales in 3Q (Oct-Dec)," it said. The broking firm believes Jul-Dec earnings of consumer staples companies would be better than its or the Street's expectations before the GST cut announcement.
Nomura expects the volume growth of the consumer staple companies to moderate sequentially in the September quarter. The brokerage sees mid-to-high single digit on-year growth for companies such as Berger Paints, Marico, Asian Paints, and ITC, while the other companies under the brokerage's coverage are expected to report low-single-digit growth. The brokerage sees a gradual improvement in the overall sales growth of consumer companies. Companies such as Marico, Tata Consumer Products, and Titan Co. are expected to post revenue growth in double digits. On the other hand, sales of Colgate Palmolive are expected to decline nearly 6%, while Nomura sees near-flat revenue growth for Asian Paints, Kansai Nerolac, and Hindustan Unilever.
The gross margins of consumer staple companies are likely to improve sequentially as they are expected to benefit from the soft raw material prices but higher advertisement expenses may limit the expansion of operating margins. The new price hikes have largely paused except for Marico as companies see the benefits of lower raw material prices, Nomura said. Carry-forward pricing will likely continue, but will taper off gradually going forward, it said.
The brokerage expects Tata Consumer Products to report better earnings in the September quarter compared to its peers due to better margins and growth in tea volumes. ITC is expected to report more than mid-single-digit volume growth, higher than its historical average but lower than its peers' growth at 25%. Marico is expected to post 30% revenue growth on year, highest among peers but the margins are likely to contract due to high copra prices. It is expected to report low-to-mid-single digit earnings before interest, taxes, depreciation, and amortisation growth.
On the other hand, the brokerage expects negative growth for Dabur, Colgate, Titan, paints companies, Hindustan Unilever, and Godrej Consumer. This will be due to above-normal rainfall and GST transition. Titan sales are expected to be weak due to rise in gold prices over 40% in the September quarter, pressuring footfalls, a high base, and shradh period in September, which is considered inauspicious to buy new products. Weak margins are likely to pressure Godrej Consumer's earnings growth due to high palm oil prices, high competitive intensity in the Indonesia business, and high brand investments in Africa. Colgate is expected to be the worst-hit in the sector, with revenue and adjusted profit declining around 6% each on year. End
Reported by Durva A. Shivalkar
Edited by Ashish Shirke
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