Titan Co shines, Britannia Industries steady: Consumer stocks back in play

India’s consumer sector is showing early signs of recovery, with demand trends improving gradually across most categories in 3QFY26. Overall sector performance remained healthy, with revenue and EBITDA growing 17% and 15% year-on-year, respectively, on a lower base and improving consumer sentiment. Even on a general basis (excluding high-growth discretionary segments), underlying growth trends suggest a steady, uneven, recovery.

Consumption trends strengthened sequentially during the quarter after temporary disruptions in October due to GST-related channel adjustments. Food categories outperformed personal care, aided by favorable tax changes and resilient demand, while staples continued to show stability. Discretionary segments showed mixed trends – jewelery saw strong growth despite rising gold prices supported by festive demand, while segments such as innerwear and quick service restaurants (QSR) saw a gradual recovery with improving channel sentiment and footfalls. Although early signs of recovery were visible in the latter half of the quarter, paints remained the outliers, impacted by the long monsoon and short festive season.

Stability in raw material prices, particularly for staples, which supported gross margin expansion and operating leverage was a key positive for the sector. Premiumization trends, particularly in discretionary categories such as alcoholic beverages, continued to improve margins. QSR players also reported sequential margin expansion, aided by better store-level economics and improving average daily sales. However, product mix challenges persisted in certain segments, highlighting an uneven profitability recovery.

Cooling inflation, supportive government initiatives and improving affordability are emerging as key catalysts for consumption recovery. Additionally, normalization in trade channels post GST adjustment and expectations of a strong summer season are likely to support demand momentum in the near term. Premiumization, formalization and category shift towards organized players continue to shape the long-term sector dynamics.

While the field is on the recovery path, the momentum remains uneven across categories. Staples and food products are expected to sustain steady growth, while discretionary segments may see a sharp recovery as demand conditions become more normal. Input costs should continue to support stability and operating leverage margins. Overall, the medium-term outlook remains constructive, driven by improving macro conditions and structural consumption drivers, although near-term performance may vary across segments.

Titan Company: Buy | Target Rs 5000

Titan delivered a blockbuster quarter reinforcing its leadership in the organized jewelery market through strong festive traction, attractive collections, impactful brand campaigns and effective exchange plans. Continued store expansion and scaling of the non-jewellery segment further strengthens its competitive moat and maintains growth momentum across categories. In 3QFY26, consolidated revenue grew 43% YoY, with standalone jewelery (ex-bullion) growing 40%. Studded growth moderate, impacted mix, while EBIT margin narrowed 60bp to 10.6% despite healthy 32% EBIT growth. Watches and eye care continued to grow, reflecting broad-based demand elasticity. We remain constructive, underpinned by Titan’s superior sourcing, studded strategy, youth focus and intensity of reinvestment, which maintains brand strength and pricing power. We model 23%/25%/27% CAGR in sales/EBITDA/APAT over FY25-28E.

Britannia Industries: Buy | Target Rs 7150

Britannia Industries reported a solid 3QFY26 performance, posting 9.5% YoY revenue growth despite GST-led disruptions in October, regaining momentum in November-December with ~12% sales growth, 22% EBITDA growth and 18% growth in PBT on strong biscuits and allied categories. With 60-65% of its portfolio in the INR5/INR10 LUP pack, Britannia is well positioned to benefit from GST rate revisions supporting volume growth. Stable raw material costs and a sharper distribution focus further strengthen its competitive position. Looking ahead, earnings visibility remains strong, supported by improving consumption trends, distribution expansion, product innovation and continued brand investments under the new CEO. We model 12% revenue CAGR and 14% PAT CAGR in FY26-28E, indicating sustained growth momentum.

(Written by Siddharth Khemka, Head of Research – Wealth Management, Motilal Oswal Financial Services)

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