Consumer Sector Q4 Results Preview - On The Course Of Volume Pickup: Motilal Oswal

Motilal Oswal Report

We continue to believe that discretionary categories/companies have better growth potential, driven by factors such as market penetration, deeper distribution reach, GDP multiplier, higher wallet share, etc.

However, we do see growth normalisation (settling of pent-up demand). We also believe that amid intensifying competition, it will be difficult for many discretionary companies to sustain high margins.

Discretionary companies are also facing the risk of earnings cuts, along with a valuation check. However, we anticipate volume growth for staples companies to bottom out, with limited risk of earnings cuts.

Given the comfort level in valuation and earnings, we believe that select staple companies offer a better risk-reward compared to several discretionary companies over the next 12-18 months.

We recommend increasing portfolio weights for staples companies. We prefer Hindustan Unilever Ltd., Godrej Consumer Products Ltd., and Dabur India Ltd. in the staples category. In the discretionary category, we continue to favor the jewelry space and prefer Titan Company Ltd.

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