Nuvama Identifies Top Consumer Sector 'BUY' Picks for Q2 FY27
Nuvama Institutional Equities has announced its top 'BUY' recommendations within the Indian consumer sector, anticipating robust performances ahead of the September quarter (Q2 FY27) earnings season. The brokerage firm highlights Marico Ltd, Radico Khaitan Ltd, United Breweries Ltd, Hindustan Unilever Ltd (HUL), and Tata Consumer Products Ltd as key companies poised for growth.
Marico Ltd: Strong Revenue and Volume Growth Expected
For Marico, Nuvama projects a consolidated revenue growth of approximately 20 percent year-on-year (YoY), with overall volumes estimated to rise by 9 percent. This growth is expected to be primarily driven by strong performances in Parachute, Value-Added Hair Oils (VAHO), and strategic digital initiatives. International business is also forecast to expand by 15 percent YoY in constant-currency terms.
Specific product segment projections include Parachute sales growing 7 percent YoY (5 percent volume growth), VAHO revenue increasing 22 percent YoY, and Saffola Foods expanding 10 percent. Within Saffola Foods, the foods franchise alone is anticipated to surge by over 40 percent YoY. Gross margin is estimated to improve by 285 basis points (bps) to 45.5 percent, while EBITDA margin is expected to rise 52 bps to 16.6 percent.
Radico Khaitan Ltd: Premium Segment Drives Growth Amid Volume Decline
Radico Khaitan is expected to see consolidated revenue grow by around 11 percent YoY, with EBITDA rising 29 percent YoY. Despite an estimated overall volume decline of approximately 1 percent YoY, the premium-and-above (P&A) segment is projected to achieve significant growth of 26 percent in both revenue and volumes. Conversely, mass-premium revenue and volumes are expected to decline by about 23 percent and 17 percent YoY, respectively.
The brokerage forecasts gross margin to expand by 435 bps to 48 percent, and EBITDA margin to increase by 260 bps to 18.5 percent.
United Breweries Ltd: Premiumisation and Volume Recovery
Nuvama anticipates United Breweries to report a net revenue increase of approximately 16 percent YoY, fueled by premiumisation trends, overall volume growth, and favorable pricing. Total volumes are projected to rise by 20 percent YoY, with the premium segment contributing a 17 percent growth. The report notes a strong volume recovery in Karnataka following policy changes, alongside robust growth in Maharashtra.
EBITDA is expected to jump by 56 percent YoY, despite a projected decline in gross margin by 223 bps to 40.7 percent due to higher glass and can costs. EBITDA margin is estimated to expand by 218 bps to 8.5 percent, supported by productivity initiatives.
Hindustan Unilever Ltd (HUL): Steady Growth with Margin Pressures
For HUL, Nuvama forecasts consolidated revenue growth of 13 percent YoY on a like-to-like (LTL) basis (excluding ice cream), driven by 7 percent volume growth and around 6 percent pricing growth. EBITDA is expected to increase by 8 percent YoY. While net revenue is projected to expand by 13 percent YoY, consolidated LTL volumes are estimated to grow 7 percent.
Gross margin is anticipated to decline by 221 bps YoY to 48.3 percent, with EBITDA margin estimated at 23.1 percent. Profit After Tax (PAT) is projected to grow 8.5 percent YoY. Tea volumes are expected to remain subdued due to weakness in the first half of Q2, LPG availability issues affecting out-of-home consumption, and the impact of delayed monsoons.
Tata Consumer Products Ltd: Diverse Growth Across Segments
Tata Consumer Products is expected to achieve consolidated revenue expansion of approximately 13 percent YoY in Q2 FY27, with India branded volumes growing 11 percent. EBITDA is projected to increase by 16 percent YoY. Tea growth is anticipated to be broadly flat YoY in both revenue and volumes, with the negative impact on tea normalising but facing a higher base and ongoing LPG-related issues.
Salt growth is expected to remain healthy, driven by 6-7 percent pricing and around 7 percent volume growth, translating to 13-14 percent revenue growth. The company's growth businesses, including Sampann, Soulfull, and RTD business NourishCo, are projected to expand significantly, by around 50 percent, 40 percent, and 30 percent YoY, respectively. International constant-currency growth is expected at approximately 2 percent. USFDA-related issues are noted to be affecting Organic India (OI) in Q2. Overall EBITDA margin is estimated to expand 37 bps YoY to 13.9 percent.
FMCG Sector Outlook
Separately, BNP Paribas India indicates that the Fast-Moving Consumer Goods (FMCG) sector appears well-positioned for sales growth in Q2 FY27, although margins are likely to remain under pressure across the industry.