Trent, DMart, HUL Lead UBS' Top Consumer Stock Picks On Demand Rebound In FY26
UBS has turned optimistic on India's consumer sector; On the downside, it maintained 'Sell' ratings on Asian Paints, Dabur, Jubilant FoodWorks
UBS has turned optimistic on India's consumer sector, forecasting a 13% earnings growth for FY26 and naming Avenue Supermarts (DMart), Trent, and Hindustan Unilever (HUL) as its top stock picks. The brokerage has upgraded several stocks in the space, banking on a demand rebound, easing input costs, and expected income boosts from potential tax cuts and the upcoming Eighth Pay Commission.
UBS noted that consumer stocks have underperformed the broader market during both the recent rally and ongoing correction, which has brought valuations to more attractive levels. The current market conditions, it said, present a 'goldilocks" scenario—favourable for a turnaround.
The firm believes FY26 could be an inflection point for the sector, supported by cyclical earnings recovery and improving macro fundamentals such as falling inflation, rising rural wages, and fiscal stimulus measures.
Among its top picks, UBS highlighted Avenue Supermarts and Trent as strong 'income stimulus plays," with robust value retail models poised to benefit from increased disposable incomes. DMart, which last traded at Rs 4,357, has been given a target price of Rs 5,200—indicating a 19% upside. Trent, trading at Rs 5,131, was assigned a target of Rs 6,200, suggesting a 21% potential gain.
UBS said DMart is ramping up store expansion and enhancing its e-commerce platform, DMart Ready, to align with the shift towards quick commerce. It expects DMart to deliver a 20% revenue CAGR and 25% EPS CAGR from FY25 to FY27.
Trent, which runs the Zudio and Westside retail chains, is seen benefiting from aggressive expansion into tier-2 and tier-3 cities. UBS projects a 29% revenue CAGR and 36% EPS CAGR for the company over the same period.
For turnaround potential, UBS is backing Hindustan Unilever. Once a sector leader, HUL has recently lagged, but the brokerage sees room for a comeback. It expects volume growth to recover to 6-7% in the second half of FY26, supported by falling input costs and a refreshed strategic focus under its new global CEO. The stock, currently at Rs 2,375, has a target price of Rs 2,800.
Additionally, UBS upgraded Colgate-Palmolive, Godrej Consumer Products (GCPL), and ITC to 'Buy'. It sees Colgate regaining share in oral care while recovering from a strategic margin reset, and expects GCPL to benefit from product innovation in insecticides and stronger global performance.
ITC, meanwhile, is viewed as attractively valued following a recent correction driven by tax-related concerns. UBS believes the current price reflects conservative growth expectations.
On the downside, the brokerage maintained 'Sell' ratings on Asian Paints, Dabur, and Jubilant FoodWorks. It cited ongoing margin pressures and competition at Asian Paints, weak growth visibility at Dabur, and limited upside at Jubilant despite improving same-store sales.
UBS concluded that the consumer sector is emerging from a weak phase and is ripe for rerating as both cyclical and structural headwinds begin to ease. While it slightly trimmed its FY26 GDP growth forecast for India to 6%, it believes the impact on consumption will be minimal, particularly in categories like packaged foods, quick service restaurants, and value retail.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
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