The brokerage company HDFC Securities is bullish on the consumer discretionary goods & services (CDGS) sector ahead of Q1FY23 Results.

The brokerage company HDFC Securities is bullish on the consumer discretionary goods & services (CDGS) sector ahead of Q1FY23 Results. The brokerage has given shares of Kajaria Ceramics, Somany Ceramics, Supreme Industries, and Prince Pipes a buy call rating with target prices of Rs. 1,310, Rs. 840, Rs. 2,630, and Rs. 830, respectively. While the brokerage has indicated ADD rating for Astral Limited shares at a target price of Rs. 1.790.

HDFC Securities has said in a note that “In Q1FY23, we expect volumes of both tiles and plastic pipe companies to moderate QoQ. However, given last year’s low base, we expect a strong uptick YoY. We expect margin pressure in both segments. Elevated gas prices and slower export offtake (for Ceramics) and inventory losses and channel destocking (for pipes) would pull down margins in Q1FY23. Hence, we expect aggregate revenue for our coverage universe to decline by 18% QoQ (although it may be up 46% YoY on a low base). Further, we expect the aggregate EBITDA margin to contract 250/300bps QoQ/YoY on account of the headwinds outlined above. We maintain BUY on Kajaria Ceramics, Somany Ceramics, Supreme Ind, and Prince Pipes and ADD on Astral."

“We expect national ceramic players to deliver ~50% YoY volume growth (on a low base), lower by ~7-10% QoQ. Owing to elevated gas prices, we expect both Kajaria and Somany to report ~160/155bps QoQ EBITDA margin compression (down 85/35bps YoY) to 13.5% and 6.7% respectively. On a low base, higher volumes should lead to both Kajaria/Somany delivering a 72/64% YoY EBITDA rebound. Similarly, on a low base, we expect pipes volumes for Supreme/Astral/Prince to rise 52/53/59% YoY. However, we expect their EBITDA margins to compress 355/470/305bps YoY respectively on account of inventory losses and delays in cost pass-through," said HDFC Securities.

“We remain positive on both tiles and pipes demand, owing to a continued healthy domestic demand outlook (in both segments) and expected rebound in tiles exports (moderating pressure on domestic prices). In the near term, elevated gas prices will continue to impact margins for ceramic manufacturers. PVC resin price correction should boot price-sensitive agri demand, in addition to supporting plumbing sales uptick. Factoring in elevated gas prices (tiles) and inventory losses (pipes), we trim our profit estimates for coverage companies for FY23/24E and lower our target prices. We maintain BUY on Kajaria Ceramics, Somany Ceramics, Supreme Ind, and Prince Pipes. We maintain ADD on Astral," HDFC Securities has claimed.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

Download the Mint app and read premium stories

Log in to our website to save your bookmarks. It'll just take a moment.

You are just one step away from creating your watchlist!

Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.

Your session has expired, please login again.

You are now subscribed to our newsletters. In case you can’t find any email from our side, please check the spam folder.

This is a subscriber only feature Subscribe Now to get daily updates on WhatsApp