The third quarter earnings season have not brought new tides in for the urban consumption space, but the sailing might be smoother from here on. Over the past two quarters, buyers in the metro and tier-1 cities hit pause on spending. If garlic is Rs 500 per kilogram, who has extra cash lying around to spend on discretionary items?
The rural section seems to be doing well, while the premiumization theme is paying off. It's the man and woman and child stuck firmly in the middle that are feeling the squeeze.
However, the results we're seeing so far from consumption-focused companies indicates that the pressure might abate in a few quarters. Most experts are now pinning their hopes on Finance Minister Nirmala Sitharaman to review the income tax slabs in the upcoming Union Budget, giving investors more cash in their hands.
While the RBI is unlikely to loosen its tightened microfinance rules, the central bank might slash the key lending rate in the February MPC meeting, injecting liquidity back into the system.
But will that lead to a sustained recovery in consumer demand? Until the urban wallet gets a little fatter or the garlic gets a little cheaper, it’s a game of wait and watch!
United Spirits (Rs 1,403; -4.5%)
Shares fell after net profit of the company was down by 4 percent to Rs 335 crore in Q3FY25 against Rs 350 crore in the same period last year.
Bull Case: Nuvama expects company to continue to clock healthy volumes led by a faster scale-up in Andhra Pradesh, Karnataka tax cut and uptick in marriage days. Company reported an 11.1% sales growth, reaching Rs 3,433 crore compared to Rs 3,002 crore last year. EBITDA rose 17% to Rs 568 crore from Rs 486 crore in the previous year.
Bear Case: High launch investments, persistent inflation, and elevated Extra Neutral Alcohol (ENA) prices may limit EBITDA margin growth causing Elara Securities to lower its Earning Per Share (EPS) estimates by 1.9% for FY26 and 3.6% for FY27.
ICICI Bank (Rs 1,228, +1.5%)
Brokerages bullish after lender’s strong Q3 results
Bull case: ICICI Bank's strong execution, superior asset quality, and industry-leading return on assets, supported by robust CASA growth, position it for sustained earnings growth and market leadership, with price targets from major brokerages ranging between Rs 1,440 and Rs 1,600.
Bear case: Any potential decline in net interest margins (NIMs) or challenges in maintaining asset quality amidst competitive pressures could impact ICICI Bank's earnings momentum, creating headwinds for its stock performance.
(With inputs from Lovisha and Neeshita.)
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