Given the recent decline in raw material prices in the range of 5-26 per cent, analysts are beginning to turn bullish on consumer discretionary stocks. Domestic brokerage ICICI Direct said companies from PVC pipes, consumer electricals and paint segments shall be major beneficiaries of the decline in raw material prices.
Softening in inflation may augur well for consumer discretionary players ahead of the festive season, the brokerage added. Besides, the government’s capex push, favourable demographics as well as resilience in real estate shall enable long-term volume growth for segments within the space, including paints and electrical consumer companies, it said.
Given the bullish outlook, the brokerage has come up with five ‘buy’ ideas from the consumer discretionary space.
The brokerage has upgraded the stock to a ‘Buy’ from ‘ Hold’ earlier amid strong performance of the company’s brand, and hopes of margin recovery following a fall in input material prices. It has set a target price of Rs 1,650 for Havells, signalling a potential upside of over 23 per cent.
The brokerage is bullish on the counter as it sees EBITDA margin expansion. It has set a target price of Rs 1,470 for the stock, suggesting an upside potential of 22 per cent.
The brokerage is bullish on Asian Paints given its leadership position in the decorative paints market and high earnings growth in the backdrop of recovery in EBITDA. “While Q2FY23 will see the impact of high-cost inventories, EBITDA margin recovery will kick in from Q3FY23 onwards, supported by softening of raw material prices. Going forward, we revise our margin estimates for Asian Paints upwards by 60 bps YoY for FY24E,” it said. ICICI Direct has a target price of Rs 4,045 on the stock, signalling a potential upside of 17 per cent.
Supreme Industries
ICICI Direct’s target of Rs 2,510 suggests a 17 per cent upside for the stock. “Supreme Industries will be one of the major beneficiaries of demand revival in PVC pipes amid sharp fall in PVC prices (by 24 per cent),” said the brokerage firm.
Polycab
“We continue to like Polycab for its leadership position in the wire & cable space. Polycab has maintained its FY26E revenue guidance of Rs 20,000 crore (implied revenue CAGR of 13 per cent FY22-24E),” the brokerage said while recommending a target price of Rs 2,950.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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