Consumer Staples, Discretionary Outlook 2022 - Time To Go Bottom-Up: ICICI Securities
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ICICI Securities Report
Staples: Demand uncertainty during periods of high inflation is a tough challenge to navigate as companies look to manage growth and margins. Peak margins for most with increasing salience of e-commerce and modern trade likely means years of margin headwinds for fast moving consumer goods. We reckon, most companies are getting distracted from their core agenda of penetration-driven growth as they worry about disruption in all facets of operations. That said, we expect the industry formalisation thesis to sustain.
Discretionary: Growth drivers are- 1. sharp demand recovery (mostly priced in), 2. store expansion and (some) cost efficiencies driving operating leverage and industry tailwinds (quick service restaurant, jewellery).
Paints: We believe the players will have to choose between market shares and margin over next two years which may dampen economic value added creation and act as catalyst for de-rating of valuation multiples.
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