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From our retail universe we expect companies catering largely to the urban population and operating in mid premium segment to outperform its peers. Metro Brands, Trent and Page are expected to register healthy YoY growth as the impact of inflation on the target consumer audience of these companies is least as of now. Also, the strong brand strength has allowed these companies to pass on the RM inflation with relative ease during last year. From our building materials universe we expect PVC pipes manufacturers such as Supreme Industries to expect to continue feeling margin pressure in the second quarter.  We estimate bottoming out of margins for PVC pipes players in the quarter before it starts recovering in 3Q. Cera Sanitaryware in building materials space is expected to perform relatively better compared to pipes, tiles and wood panel sectors as per our channel checks. From our midcap miscellaneous coverage – CCL Products and La Opala are expected to register healthy YoY growth. Retailers operating in mid premium segment to outpace its peers

As we have been highlighting since last quarter that impact of inflation is on a higher side for companies targeting value for money customers and the ones with strong business in tier II/II/IV towns of India. DMART though registered sales growth of 35% on YoY basis large part of growth is on account of healthy store expansion. We expect pressure to continue on its General Merchandise & Apparel segment as the consumers of DMART continue to feel the pinch of inflation. Within footwear segment we expect Metro Brands (+40% YoY) to outpace Bata (+24% YoY) followed by Campus (+20%, Not Rated) and Relaxo (-10% YoY). We expect margin improvement for Bata and Metro on YoY basis due to low base effect while Relaxo will have bottoming out of margins in 2Q. In innerwear category we expect Page to report modest 15% of growth on a YoY basis. As per our channel checks though July’22 was flat vs. July’21, sales trajectory improved in subsequent quarters for Page Industries.

Sanitaryware to perform relatively better vs. other building material categories

All the PVC pipes manufacturers including Supreme Industries are expected to continue facing margin pressure. We expect margins to bottom out for Supreme before they start recovering in 3Q. Also, with price stability for PVC resins inventory stocking by PVC pipes distributors is expected to improve driving volume growth for Supreme from 3Q onwards. Agri pipes demand, though better compared to last couple of years, is yet to fully recover to pre-pandemic levels. Sanitaryware segment is relatively better placed compared to PVC pipes, tiles and wood panel segments. We expect CERA to report moderate growth of 6% with stable QoQ margins. Impact of higher gas prices on CERA is less compared to tiles companies as per the channel feedback.

CCL Products and La Opala expected to perform strong

From our miscellaneous segment, we expect CCL to report robust YoY growth (flattish QoQ). Volume and price trend remains strong on a YoY basis. We also expect margins to improve sequentially for CCL Products as the higher coffee prices gets fully reflected in sales. Apart from this, La Opala too is expected to have healthy quarter. Demand during Onam and Durga Puja is expected to boost the sales growth in 2Q and 3Q as per the feedback that we have received. EBITDA margins however, may decline sequentially as the new facility of opalware has commenced recently and it will take time for the cost to get fully absorbed. Mold-Tek Packaging from the universe is expected to register +15% growth led by strong demand in paints segment. 

Preferred picks at current price

1)  Retail: Page Industries

2)  Building Materials: Cera Sanitaryware and Supreme Industries

3)  Miscellaneous: La Opala

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