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A positive start to FY27; growth outlook improving

Within our consumer coverage universe, almost all segments are likely to see an increase in revenue/EBITDA growth YoY in 1QFY27: Staples +10%/2%, (staples ex-ITC +14% each), paints & adhesives +17% each, liquor +8% each, innerwear +16%/+13%, QSR +14%/+17%, and jewelry +36%/+29%.

* Staples companies are expected to report sequential improvement in revenue growth YoY for the domestic market. On the India front, steady volume growth with a price hike (mid-single digit) should lead to healthy revenue growth. Both rural and urban demand are expected to have remained resilient, with no major divergence. The summer season picked up well in the second half of the quarter (some markets witnessed rain disruption) to drive summer-centric products. On the international front, we expect resilient performance by companies despite severe headwinds in the Middle East. We believe that with the recent price hikes, most GST 2.0-led pricing cuts are now reversed, and consumer prices for some products are close to the pre-GST 2.0 level. In 1QFY27, margin pressure is projected to remain limited amid older inventory and price hikes. However, pressure is likely to be more pronounced in 2QFY27. However, with RM prices now cooling off, the margin outlook for 2HFY27 is improving. We expect our coverage universe ex-ITC to deliver a sales/ EBITDA/APAT growth of 14% each in 1Q.

* Paint & Adhesives: Industry demand remained healthy through 1QFY27, with strong trade buying in April ahead of the mid-month price hikes, followed by normalized channel stocking in May and a pickup in demand during the latter half of June, aided by the delayed monsoon in several regions. Importantly, healthy secondary sales throughout the quarter indicate that growth was driven by underlying retail demand rather than channel filling alone. We expect leading paint companies to report healthy double-digit value growth, supported by strong volumes and the benefit of recent price hikes (12-14%). While higher input costs are expected to result in partial gross margin pressure in 1Q, the full impact is likely in 2Q as higher-cost inventory flows through. Companies are expected to maintain pricing discipline and look to offset easing commodity prices through calibrated dealer incentives rather than immediate price cuts. We model a sales/EBITDA/ PAT growth of 17%/ 17%/16% for our coverage universe in 1Q.

* Liquor companies are expected to start FY27 with the continued trend of premium spirits outperforming popular segments. However, elevated inflation in key raw materials (glass, PET, packaging, etc.) is expected to weigh on gross margins, to be partly offset by premiumization and pricing. We expect UNSP to report another weak quarter, with ~4% volume decline but ~5% revenue growth. P&A volumes are expected to remain muted with continued sharp declines in the popular segment due to the MML impact and initial disruption from Karnataka policy changes. These resulted in mid-single-digit revenue growth and largely flat EBITDA. However, Radico is expected to maintain strong double-digit revenue and EBITDA growth, led by robust P&A momentum. UBBL is likely to deliver healthy volume-led revenue growth aided by a promising summer season and favorable Karnataka policy (supporting premiumization), although profitability may remain under pressure due to sharp cost inflation. The India-UK FTA, effective from mid-July, is a structural positive for the sector and is expected to provide meaningful margin benefits from 2HFY27 through lower Scotch import duties. The spirits space will also benefit from supportive state policies (UP and Karnataka). We expect sales/EBITDA/PAT growth of 8%/8%/7% for our coverage companies in 1QFY27.

* The innerwear sector is witnessing continued demand improvement in 1QFY27, with healthy secondary sales. The industry has been passing input cost inflation through calibrated price hikes, with ~4% pricing implemented in April and a further ~2% increase expected across most brands in July. Competitive intensity has also moderated as peers have reduced deep discounting and shifted towards pricingled growth. We expect PAGE to deliver double-digit revenue growth in 1QFY27, aided by an improving demand environment and better pricing discipline across the industry. PAGE continues to focus on premiumization by launching new products and investing in marketing and technology. We expect a sales/EBITDA/ PAT growth of 16%/13%/16% for the company.

* QSR demand trends improved sequentially in 1QFY27, with most brands performing better than in 4QFY26. However, momentum moderated in Adhik Maas (end May and first half of June). KFC (Devyani and Sapphire) is expected to deliver mid-single-digit SSSG, while Pizza Hut SSSG is likely to be flattish. Jubilant FoodWorks and Westlife Foodworld are expected to post low-single-digit SSSG, while United Food Brands continues to outperform with double-digit SSSG. Gross margins are expected to remain broadly stable, aided by earlier price hikes, although labor inflation and operating costs are likely to limit restaurant margin expansion. We expect sales and EBITDA growth of 14% and 17% for 1QFY27, respectively

* Jewelry: In 1QFY27, average gold prices rose 59% YoY (vs ~80% YoY in 4QFY26) and remained broadly flat QoQ. Despite elevated gold prices, demand stayed resilient during the quarter. Sales were temporarily impacted following the customs duty increase (6% to 15%), as well as by the disruption from the Adhik Maas period; however, demand recovered quickly later in the quarter as gold prices moderated. Companies are expected to see a one-time inventory gain on account of the customs duty increase. We model a sales/EBITDA/PAT growth of 36%/29%/33% for our coverage jewelry companies in 1Q. Our numbers exclude the one-time inventory gains (which may happen post-customs duty increase).

* Outperformers and underperformers: Among our coverage companies, Titan, Kalyan Jewelers, Radico, Marico, GCPL and Nestle are expected to be outliers in 1QFY27, whereas ITC, UNSP and UBBL are anticipated to be the underperformers.

* Outlook: Consumption demand remained healthy through 1QFY27, supported by a strong summer season and resilient rural and urban demand. Categories such as paints also saw improving secondary sales and calibrated price hikes across categories. However, input cost inflation (glass, packaging, PET, and select agri-commodities) has started flowing through, with only a partial impact on 1Q margins owing to older inventory and recent price hikes. The full cost impact is likely to be visible in 2QFY27. With commodity prices now showing signs of moderation and companies maintaining pricing discipline, the margin outlook for 2HFY27 is improving. Overall, we expect healthy revenue growth across most consumption categories in 1QFY27, while profitability is likely to remain mixed in the near term before improving in the second half of FY27. Our top picks are Titan, Radico, Zydus Wellness, Britannia, and Marico.

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