These are Macquarie’s top stock picks from consumer discretionary space

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Published: November 16, 2017 6:00:02 PM

The consumer discretionary space offers a lot of attractive opportunities for investors, especially after the companies in the space reported better volumes in Q2 as compared to the previous quarter.

Macaquarie says that a lot of players in the consumer discretionary space will benefit from GST. (Image: Reuters)

The consumer discretionary space offers a lot of attractive opportunities, especially after the companies in the space reported better volumes in Q2 as compared to the previous quarter. In an interview to CNBC TV18, Amit Sinha, Consumer Analyst, Macquarie Capital Securities shared the company’s top picks from the space. Their top pick from the staples sector is HUL and Godrej Consumer Products and from the discretionary space is Jubilant FoodWorks and Titan. In fact many top global firm have pointed out that Jubilant FoodWorks, exclusive India franchisee of Domino’s pizza is a top bet from the space. Deutsche Bank has raised its target price on the shares of Jubilant FoodWorks, after the company  announced a two-fold rise in net profit in the latest quarter. Other global brokerages such as Morgan Stanley and CLSA too remain bullish on the company.

Track live stock prices: HULGodrej Consumer ProductsJubilant FoodWorks and Titan

CLSA has a buy on the shares with a target price of Rs 2,200. CLSA’s target price implies an upside of more than 24% from the current market prices. According to CLSA, Jubilant FoodWorks’ management has customer satisfaction and and cost optimisation as its top priority. Apart from Jubilant FoodWorks, Macquarie sees long-term fundamentals in ITC. The expert pointed out that industry volume growth is gradually recovering on back of signs of recovery in rural market. However, even though the volumes in Q2 were better than Q1, there is pain still seen in segments like wholesale. General trade and modern trade has done well, he said.

He sees a lot of players in the space benefitting from GST. “In GST regime, the organised players will gain significantly on account of structural price reduction between them and the unorganised players,” he told the channel. Further, he pointed out that the recent reduction in GST rates for certain items is positive for some  consumer staples and consumer discretionary companies, adding that players like HUL can gain significantly because of lower retail prices and will also gain market share.

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