Staples experienced moderate growth as the GST transition and a prolonged monsoon disproportionately weighed on personal care segments. While demand for packaged foods remained stable, 2-3% of most companies’ sales were affected by trade transitions.However, stability is expected from November onwards as volatility decreases and price/gram size adjustments reach consumers. Rural markets continued to outpace urban areas for the seventh quarter in a row, supported by resilient demand for essential commodities.
Paint, on the other hand, began to show signs of revival from late September, helped by festive repainting, improving the rural feel and normalizing trade inventory.
The spirits sector maintained strong momentum, driven by premium spirits and favorable input costs, even as beer volumes remained weak due to weather-related disruptions. Jewelry further extended its outperformance, achieving 26% sales growth despite high gold prices and a heavy monsoon. Innerwear, while subdued in July and August, recovered towards the end of the quarter on improving sentiment and early festive buying. Premiumization emerged as a consistent growth driver across spirits, jewelry and certain staples categories. The rise of alternative channels – particularly e-commerce and high-speed commerce – continued to accelerate FMCG penetration, making a meaningful contribution to omnichannel growth. However, competitive intensity in the paint sector remained high due to aggressive promotions by new entrants, putting pressure on value growth and margins.
Margin performance was mixed across the sector. High inventories continued to impact basic product gross margins, while paints benefited from favorable raw material prices. Beer suffered from negative operating leverage, and QSR players saw their margins squeezed due to subdued dining trends. Jewelry stood out for margin expansion, supported by a better mix of studs.
The medium-term outlook for the sector remains constructive. A favorable winter season will boost personal care, beverages and health supplements. Rural sentiment – supported by government measures and stable incomes – should further fuel basic needs and discretionary categories.
Party and wedding-driven demand is expected to support momentum in the jewelery and spirits sector, while paints could see a strong recovery in the second half of the year as normalcy returns. Innerwear and QSR players expect improved throughput as consumption gradually increases.
Overall, the consumer sector is positioned for a steady recovery, underpinned by structural premiumization trends, channel diversification and easing input cost pressures.
Titan Company: Target Rs 4500
Titan Company (TTAN) continues to demonstrate robust momentum in its jewelry, watch and emerging businesses, driven by strong brand recall and omnichannel initiatives. In Q2 26, consolidated revenue grew 29% YoY to INR 187.3 billion, with standalone jewelry (ex-precious metals) growing 19% YoY and CaratLane contributing 29% YoY growth.
Standalone jewelry EBIT margin declined 60 basis points to 10.8% due to a higher mix of gold coins and promotional investments, while CaratLane’s margin grew 320 basis points to 10.2%.
Watches and glasses generated 13% and 9% sales growth respectively. Management highlighted strong holiday demand, stabilization of gold prices and continued expansion in the lower carat and 18K jewelry segments.
With 35-40 new stores planned in FY26 and a focus on renewing existing stores, Titan is positioned for sustainable long-term growth. We estimate FY25-28E revenue/EBITDA/PAT CAGR: 18%/20%/23%. Repeat the BUY, supported by superior execution, structural growth in branded jewelry and resilient margins.
Hindustan Unilever: target Rs 3050
Hindustan Unilever reported a stable Q2’26, with consolidated revenue up 2% year-on-year to INR 162.5 billion and flat underlying volume growth, in line with expectations. EBITDA declined 1% YoY to INR37.4 billion, with margins declining 80 basis points YoY to 23%, while PAT stood at INR25 billion, down 4% YoY.
Performance was impacted by the GST transition and the prolonged monsoon, but management expects a stronger recovery in the second half of FY26 as rural demand and consumption improve.
The Home Care and Beauty & Wellness segments showed healthy trends, supported by innovation and brand investments.
We estimate revenue, EBITDA and PAT CAGR at 8%/8%/9% for FY25-28, driven by volume-led growth, portfolio premiums and declining input costs. Management remains optimistic about margin improvement after the demerger.
(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd)
(Disclaimer: Recommendations, suggestions, views and opinions expressed by experts are their own. These do not represent the views of the Economic Times)
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