GCPL, Tata Consumer, Marico, Varun Beverages, ITC — Goldman Sachs' Top Picks On Consumption Revival
FMCG stocks: Goldman Sachs said it prefers stocks with bottom-up drivers. It also eyes Titan and Pidilite from the consumer discretionary basket.
Godrej Consumer Products Ltd., Tata Consumer Products Ltd., Marico Ltd., Varun Beverages Ltd., and ITC Ltd. are the counters Goldman Sachs is betting on, as it sees mass consumption revival this year.
Analysts said the signs of a consumption revival in the June quarter earnings across FMCG companies have been driven by lower food inflation and state government cash transfers. These factors may aid low-income consumption-driven categories like FMCG.
Most segments saw an improvement in volume and revenue growth in the June quarter. Aggregate volume growth in Goldman Sachs' FMCG coverage accelerated in an environment of pricing growth and a relatively high base. The expansion was broad-based and not driven by outliers.
"Rural recovery has been robust, driven by a strong winter harvest, good summer sowing, subdued food inflation, and increased welfare spending at the state level. This is also corroborated by high-frequency data showing rising agricultural real wages and two-wheeler sales," analysts said in a note.
"Urban consumption trends are mixed, impacted by idiosyncratic events and softer discretionary spending, but we expect them to slightly improve as the lagged impact of rate cuts eases financial conditions later in the year," it added.
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Goldman Sachs said its preferred stocks in the sector have bottom-up drivers.
GCPL has a high share gain from the new formulation and ramp-up of air care and liquid detergents, while Tata Consumer and Marico can scale up ‘growth’ businesses. Varun Beverages is set to benefit from increasing consumption of ready-to-drink beverages, and ITC will see margin recovery across segments in fiscal 2027.
Consumer Discretionary
Analysts also listed consumer discretionary stocks where growth will accelerate. Drivers like the tax cut and pay commission should drive middle-income consumption-driven categories like apparel, jewellery, and travel.
Titan Ltd. will see a market share-led growth, Pidilite Industries Ltd.'s non-core business is likely to expand, and Metro Brands Ltd. could scale up sports footwear. Sapphire Foods India Ltd., which operates KFC, Pizza Hut and Taco Bell restaurants across India, and Page Industries Ltd. will be able to address their value segments and sort out channel issues.
