HDFC Securities forecasts strong Q4 FY26 revenue and earnings for consumer discretionary firms, with ~23% YoY growth driven by a broad demand recovery. The jewellery sector is a standout, while apparel and paints also see improvement. Margins are set to expand, signaling a stabilizing sector.
Consumer discretionary companies are expected to post strong revenue and earnings growth in the March quarter of FY26, supported by a recovery in demand across segments, according to a report by HDFC Securities. The report points to early signs of improvement across categories, noting that the "consumer discretionary coverage universe (ex-Eternal) is expected to deliver ~23% Year on Year (YoR) revenue growth in Q4, underpinned by a broad-based demand recovery." It adds that this growth is driven by multiple segments moving together rather than a single category leading the trend.
Segment-wise Growth Highlights
Jewellery continues to stand out within the sector. The report says the segment "continued its strong growth momentum, driven by the steep increase in gold prices and rebound to high single-digit buyer growth following three flat quarters." It also estimates that "jewellery... [will] clock ~47% YoY revenue growth in Q4."
Other segments are also showing a pickup, though at a more moderate pace. The report notes that "apparel sector is likely to report ~16% revenue growth YoY," adding that "value apparel retailers are likely to outperform premium retailers, driven by recovery in SSSG and retail area expansion." The paints segment is also expected to see improvement. The report states that "growth is expected to accelerate (on a low base), supported by preemptive channel stocking ahead of industry-wide price hikes in April."
New-age businesses continue to add to overall growth. In food delivery, "we expect minimal impact on order volumes despite menu curtailments caused by LPG shortages."
Profitability and Margin Improvement
Alongside revenue growth, margins are also expected to improve, though gradually. The report notes that "margins for our discretionary space (ex-Eternal) are expected to expand by 50bps YoY to 10%, with EBITDA growth of ~29% YoY." It adds that profitability trends vary across segments. In jewellery, "we have penciled in ~20bps margin expansion to 11.1% as strong SSSG is partially offset by unfavorable product mix." In paints, "favorable raw material prices... should drive GM expansion," while "footwear companies... are likely to see margin expansion of ~50bps YoY." Apparel margins are also expected to improve, with "~40bps YoY expansion due to operating leverage."
The report also highlights that operating leverage is playing a role in supporting margins across categories. It says, "food delivery margins are expected to improve due to higher platform fees and operating leverage," though it cautions that "high competitive intensity... might keep margin expansion in check."
Outlook and Key Monitorables
At the same time, some near-term challenges remain. The report notes "minimal pressure on cost structures due to LPG shortage in Q4," but adds that this "will be a key monitorable in Q1FY27 and beyond."
Overall, the report suggests that the sector is beginning to stabilise after a period of uneven demand. It states that "with valuations moderating significantly... and fundamental green shoots emerging across segments, most pockets of our coverage now offer a reasonable risk-reward ratio." (ANI)
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