Kaustubh Pawaskar on 3 FMCG stocks to be bullish on for next 2 years (2024)

"Dabur, HUL, Marico, these stocks have started seeing momentum when there is news like monsoons are going to be good this year and though it is a late start, we have seen that monsoons are well spread out and there are news or prediction that whatever the deficit we have seen it will get covered up in the coming months," says Kaustubh Pawaskar, Sharekhan.

Now expectation is also building in that government's effort to spark up demand in rural India tier II, tier III may also benefit this pack. On valuation terms, which are the kind of ideas which you are most bullish on?
Kaustubh Pawaskar: So, there are a couple of things. One is on valuation front. Second is who will benefit large with the recovery in the rural markets. So, certain FMCG stocks have not done well in past, one, one-and-a-half years.
So, Dabur, HUL, Marico, these stocks have started seeing momentum when there is news like monsoons are going to be good this year and though it is a late start, we have seen that monsoons are well spread out and there are news or prediction that whatever the deficit we have seen it will get covered up in the coming months.


Unlock Leadership Excellence with a Range of CXO Courses

Offering CollegeCourseWebsite
IIM LucknowChief Operations Officer ProgrammeVisit
Indian School of BusinessISB Chief Technology OfficerVisit
Indian School of BusinessISB Chief Digital OfficerVisit

So that augurs well for the rural India. Second important thing is that government is expected to incentivise the rural economy to improve the consumption. So, we have already seen it has started with welfare scheme, then there was increase in the MSPs and now it is expected that in budget further boost will be given.

We should expect rural growth to improve from the current level. Large part of it will be seen in the second half of the year and that will drive the overall volume growth for the consumer good companies and it will help also earning growth to be better.

So, in that context, there are certain companies like Dabur India, Emami, Marico, HUL, who would be one of the key beneficiaries of the improvement in the rural India. Also, companies like Britannia we have already seen the volume growth recovery.

I think from here also we should expect the volume growth momentum to sustain. So, these are some of the companies which we believe would be the beneficiary of the improvement in the rural India.

But there are certain other companies like Tata Consumer Products, Godrej Consumer Products, who are playing well on the strategy, both on organic and inorganic products and I think that will help their earnings to consistently improve in the coming years. So, these are some of the picks which we believe will do well in the coming years.

I understand the point that these companies will be beneficiaries of the rural recovery in the second half of the year, but the question is, is it already in the price right now because last one month we have seen solid run up. Do you think the valuations are comfortable and how do these stocks stack on the risk reward basis? What are your top bets?
Kaustubh Pawaskar: See, if you look at the valuation and if you look at the indices, how they have moved up in past two years, I think HUL, Dabur India and Marico they have not done well if we compare it with the broader industry.
So, I think there is some bit of cream left in the stocks and we believe that with expected improvement in their performance in the quarters ahead, we should expect these stocks to perform well. In terms of consistent earning growth visibility and in terms of valuation, I think Godrej Consumer Products and Tata Consumer Products look extremely well and I think there is an upside from here also in these two stocks.

ITC, as we know that valuations are relatively lower compared to what some of the large FMCG companies are and we are expecting even ITC's non-cigarette FMCG business to see good performance in the quarters ahead. So, I think ITC is also one of the picks from the valuation point of view.

Would you be interested in getting into some of these value retailers because they are also kind of proxy to consumer at the bottom end of the pyramid?
Kaustubh Pawaskar: Value retailers, yes, so from the retail perspective or from that angle if we look, I think Trent is one of the stock which looks good. There are certain stocks like ABFRL where the performance is expected to improve because in the discretionary space if we look, the premium discretionary has done extremely well, but there were certain categories like footwear, apparels, which did not do well for last one, one-and-a-half years.

Now we believe that these are some of the categories which will start seeing a recovery. Because last one, one-and-a-half years, there was non performance from these companies.

So, we believe that ABFRL and Trent are the exception in this space and they have done extremely well and because of that we are seeing the stock price doing extremely well.

But there are certain companies like ABFRL which we believe that would see a good recovery and whatever acquisitions they have done in the recent past, I think those acquisitions will add value to their performance in the mid to long term. So, I think these are some of the companies which we believe would do well.

(You can now subscribe to our ETMarkets WhatsApp channel)

Kaustubh Pawaskar on 3 FMCG stocks to be bullish on for next 2 years (2024)
Top Articles
Latest Posts
Article information

Author: Kimberely Baumbach CPA

Last Updated:

Views: 6575

Rating: 4 / 5 (41 voted)

Reviews: 80% of readers found this page helpful

Author information

Name: Kimberely Baumbach CPA

Birthday: 1996-01-14

Address: 8381 Boyce Course, Imeldachester, ND 74681

Phone: +3571286597580

Job: Product Banking Analyst

Hobby: Cosplaying, Inline skating, Amateur radio, Baton twirling, Mountaineering, Flying, Archery

Introduction: My name is Kimberely Baumbach CPA, I am a gorgeous, bright, charming, encouraging, zealous, lively, good person who loves writing and wants to share my knowledge and understanding with you.