BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
ICICI Securities Report
As per ICICI Securities Consumer Momentum Indicator (ICMI), we find sector overvaluation of 20% (was 23% in July 2020 and 36% in April 2020).
We believe ICMI is a good reflection of relative valuations (25-year back-tested lead indicator) as it considers relative earnings momentum.
The valuations of consumer companies remain high despite the well acknowledged slowdown in consumption demand.
We believe that at such high valuation multiples, stock returns through multiple expansion are behind us.
Zomato says 20% of its customers from larger cities have moved to smaller towns. We believe that, as these consumers could still continue to consume the same products (relatively more premium versus the usual consumer in smaller towns).
This means that the commentary over the next few months could be around faster recovery in rural driven by greater consumption (more people) and premiumisation.
We however note that some of this could be optical and not sustainable.
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