F&B players to sustain outperformance; Britannia, Marico top picks: JM Fin

Food and beverage (F&B) companies are expected to continue outperforming other staples players, supported by healthy Ebitda growth and stable margins, according to JM Financial Institutional Securities. 

For the third quarter of financial year 2026 (Q3-FY26), the brokerage's staples coverage (excluding ITC and Varun Beverages) reported sales growth of 10.3 per cent year-on-year (Y-o-Y) and Ebitda growth of 10.8 per cent Y-o-Y, around 2-3 per cent ahead of consensus estimates and stronger than the first two quarters' trajectory. 

JM Financial noted that F&B players outperformed home and personal care (HPC) companies on both sales and Ebitda growth. Gross margins remained stable Y-o-Y after witnessing compression over the previous five quarters. A stable raw material basket and manageable inflation in certain inputs also supported margins, the brokerage said.  

Management commentary across staples companies indicated a stable-to-improving trend in the fourth quarter and a better FY27 compared with FY26, with an increased focus on driving sales growth.

Q4 outlook

Within F&B, the brokerage expects continued outperformance, citing channel checks that indicate acceleration in fourth-quarter sales growth for companies such as Britannia Industries and Bikaji Foods International. It forecasts low double-digit to mid-teen sales growth for key F&B names including Tata Consumer Products and Nestle India. 

In the HPC segment, JM Financial expects Marico, Honasa Consumer and Godrej Consumer Products to sustain volume momentum alongside improving Ebitda growth. Dabur India and Varun Beverages could see improved volume growth depending on a normal summer season, while Colgate-Palmolive India may continue to lag peers amid intense competition. 

For Q4, the brokerage expects Marico to lead the HPC segment with around 20 per cent sales growth, followed by 9-10 per cent growth for Dabur India and Godrej Consumer Products, and mid-single-digit growth for Colgate-Palmolive India and Hindustan Unilever. 

Britannia Industries, Dabur India, Tata Consumer Products and Godrej Consumer Products are likely to deliver Y-o-Y margin expansion in the fourth quarter, resulting in mid- to high-teen Ebitda growth, JM Financial said. 

Sector valuations, at around 53 times next twelve months price-to-earnings (P/E), are close to the 10-year average, limiting room for error, it said. The brokerage prefers Britannia Industries, Marico and Honasa Consumer within the sector. 

Management commentary also highlighted a transition-led impact in October, followed by improved volume trends driven by festive demand, grammage increases and normalisation of trade channel operations. The pace of acceleration in volume growth will remain a key variable for potential re-rating going forward, the brokerage added. 

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