Motilal Oswal’s Top Picks In India’s Consumption Basket
Gautam Duggad also listed three themes to avoid within the consumption space.
Large Indian consumer companies will continue to grow market share as the pandemic will only hasten the shift from the unorganised to the organised segment, according to Motilal Oswal.
Companies that gain market share, have a good track record and are leaders in their respective categories will find preference, Gautam Duggad, head of research at the financial services firm, said on BloombergQuint’s 'Talking Point'. Duggad listed Hindustan Unilever Ltd., Britannia Industries Ltd., Pidilite Industries Ltd. and Titan Co. among his top consumption picks.
The shift in market share that began after demonetisation and goods and services tax rollout may carry forward due to the pandemic as smaller players are finding it difficult to manage their balance sheet and working capital, Duggad said.
Duggad listed retail, hotels and aviation as the pockets he would like to avoid within the consumption basket as uncertainty over consumer behaviour will remain even after things return to normal after the Covid-19 outbreak.
Bullish On Dabur, Tata Consumer
Motilal Oswal recently upgraded Dabur India Ltd. to 'Buy', citing its strong franchise, product portfolio and the arrival of its new chief executive officer. Tailwinds in the health and hygiene categories due to Covid-19, expansion in rural distribution, a net cash balance sheet coupled with strong return on equity are some of the other factors Duggad cited for the bullish bet.
After being an underperformer for nearly a decade, Tata Consumer Products Ltd.'s turnaround got a boost on the arrival of N Chandrasekaran as chairman at parent Tata Sons Ltd., Duggad said. Shifting focus away from the overseas business that impacted cash flow generation back to India was a positive for the company, he said.
Duggad expects the company to generate positive operating cash flow worth Rs 700-800 crore over the next two years. "Any improvement in RoE going forward will be disproportionately rewarded."
The stock has gained 26% so far this year and is the top performer in the Nifty FMCG index that rose 1.7% during the period.
Among other stock picks, Duggad has shortlisted Mahindra & Mahindra Ltd. and Kotak Mahindra Bank Ltd. as potential wealth creators.
Watch the full interview here:
