5 Stocks To Buy From The Consumer Goods Space On Which Sharekhan Is Bullish

Sharekhan's consumer goods universe is expected to register an 8% y-o-y revenue growth in Q3FY2023 (excluding ITC growth is expected at ~11%), largely led by price hikes, while volume growth is expected to be flat to low single digit for most companies. The brokerage has come-up with its latest report on the consumer goods companies, where it expects demand slowdown in rural markets. Here are 5 stocks to buy where the brokerage is upbeat.

Buy HUL stock, says Sharekhan

On HUL, the brokerage has a "buy" call with a price target of Rs 3005. "Revenue is expected to grow by 14% y-o-y, aided by 20%/14%/10% y-o-y growth in the homecare/personal care/foods and refreshments categories. Domestic volume growth is expected in mid-single digit. Higher raw material and packing material prices coupled with inferior product mix would lead to a 412 bps and 167 bps y-o-y decline in gross margin and OPM, respectively. On a sequential basis, margins are expected to be higher by 200/50 bps, aided by price hikes. In line with the 6% y-o-y increase in operating profit, PAT is expected to increase by 7% y-o-y," the brokerage has said.

Britannia Industries

On Britannia Industries the brokerage has a price target of Rs 5060. According to Sharekhan revenue is expected to grow by 20% y-o-y with volume growth of 4-5% and price-led growth of 15%. "Margins are expected to be stable y-o-y (gross margin down by 49 bps and OPM up by 32 bps) as increased raw-material prices will be mitigated by price hikes undertaken. In line with the 22% y-o-y increase in operating profit, PAT is expected to grow by 23% y-o-y," Sharekhan has said in its report.

Buy Marico Industries

On Marico, the brokerage has a "buy" call with a price target of Rs 645. According to Sharekhan, revenue is expected to grow by 4% y-o-y, led by strong double-digit growth in Saffola portfolio and international business, while value-added hair oil had yet another tepid quarter due to slowdown in rural demand and tepid sentiments in the mass consumption category. "Gross margin is expected to improve by 129 bps y-o-y, while OPM is expected to marginally improve by 34 bps y-o-y as price hikes mitigate the impact of higher raw-material prices. Muted revenue growth coupled with just mid-single digit growth in the operating profit, led to a marginal increase in PAT on a y-o-y basis," Sharekhan has said.

Nestle India

For Nestle India, Sharekhan has a price target of Rs 23,550. Revenue growth is expected at 17% y-o-y, aided by price hikes and distribution expansion. Both India and exports business are expected to report double-digit y-o-y growth. Gross margin is expected to reduce by 280 bps y-o-y, while OPM is expected to be lower by ~190 bps y-o-y due to higher raw-material prices. In line with the 7% increase in operating profit, PAT is expected to improve by 7% on a y-o-y basis, the brokerage has stated.

Buy, Dabur India stock

The other stock that Sharekhan has suggested to buy is the stock of Dabur India. We expect 4%/5% y-o-y growth in the domestic/international business. "Volume growth in the domestic business is likely to be lower, impacted by rural weakness and moderation in growth of healthcare products due to the high base. Gross margin is expected to decline by 248 bps y-o-y due to lower revenue growth, adverse sales mix, and higher input prices; while OPM is expected to report a 208-bps y-o-y decline because of higher A&P spends," the brokerage has said.