After massive underperformance in the post-Covid-19 rally, the FMCG index is also expected to outperform the Nifty in CY22 and CY23.
, which it describes as the best value pick, has a tactical buy call on , Polycab, Tata Consumer and .
“Based on the structural theme of premiumization in existing products and larger TAM, we believe Havells and Polycab will be the immediate direct beneficiaries of CU/AL price correction. Havells outperformed its peers in the core business, but the high competitive intensity has taken a toll on Llyod’s performance. Thus, we expect lower copper and aluminum prices to lead to margin expansion in core business for Havells and Polycab,” Edelweiss said.
Edelweiss analyst Arun Jain cites two key catalysts that can trigger a rally in FMCG stocks: cooling off of key raw material cost, which will be retained by most companies, and reasonable valuation after correction in multiples despite no significant earnings downgrades.
“Tata Consumer (Earnings CAGR +29 per cent for FY22–24E) and Britannia (CAGR +16 per cent) are our top picks based on structural double-digit subcategory growth (packaged food) and highest-earning CAGR within our coverage universe,” Jain said.
Edelweiss Wealth’s top 4 consumer stocks:
: Target Price: Rs 1,470 (30 per cent upside); Stop-loss: Rs 1,000
: Target Price: Rs 2,800 (30 per cent upside); Stop-loss: Rs 2,100
Ltd: Target Price: Rs 880 (21 per cent upside); Stop-loss: Rs 650
: Target Price: Rs 4,300 (18 per cent upside); Stop-loss: Rs 3,300
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)