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Business Standard
01-06-2025
- Business
- Business Standard
Not the time for concentrated bets, thematic funds: Mirae's Neelesh Surana
Discretionary segments, he believes, may rebound as interest rates fall, rural incomes improve, and the government steps in with measures such as tax cuts and the Eighth Pay Commission Puneet Wadhwa New Delhi Listen to This Article With the January–March 2024–25 earnings season drawing to a close, Neelesh Surana, chief investment officer at Mirae Asset Investment Managers (India), tells Puneet Wadhwa in an email interview that they expect around 12 per cent earnings growth over the next two years, driven by banking, financial services and insurance (BFSI), metals, telecommunications (telecom), and a revival in consumer sectors. Discretionary segments, he believes, may rebound as interest rates fall, rural incomes improve, and the government steps in with measures such as tax cuts and the Eighth Pay Commission. Edited excerpts: Are global markets over-optimistic about the macro outlook? How might
Time of India
20-05-2025
- Automotive
- Time of India
Auto cycles, EV sparks & IT shifts: Kumar Rakesh decodes FY26's investment gears
Kumar Rakesh , Analyst – IT and Auto at BNP Paribas, shares his outlook on key trends shaping the auto and IT sectors as we head into FY26. He believes the passenger vehicle segment has likely bottomed out and is poised for a gradual recovery, supported by stabilising affordability and potential policy catalysts. Two-wheeler growth, however, may remain subdued amid tighter financing. In IT, Rakesh sees improved valuations and strong relative earnings growth making the sector attractive despite global uncertainties. He also highlights growing EV adoption—particularly in two-wheelers—as a key theme, supported by upcoming product launches and policy incentives. Let's start with the pulse of the auto sector. Where are we in the auto industry cycle, especially when it comes to 2-wheelers and 4-wheelers? We see the passenger vehicle industry to have troughed and expect a gradual growth recovery in the coming years. The last two years' growth slowdown was driven by a high base that was created post Covid by pent-up demand, and a sharp fall in affordability. While the base is normalised, our affordability index is showing that passenger vehicle affordability has largely stabilised over the last year, after having fallen considerably in the prior years. The catalyst to drive this growth recovery would be tax cuts announced in the recent budget and implementation of Eighth Pay Commission in 2026, apart from the stable affordability. For the 2W-industry, we expect the growth slowdown to continue in FY26. We have seen a sharp growth moderation in the recent months which we believe was driven by tighter financing availability. The industry had started seeing an increase in two-wheeler delinquencies resulting in a higher credit cost for the financial institutions. We have noticed a lot of the captive financing entities of the two-wheeler companies, NBFCs and MFIs, to have slowed down their disbursements in the second half of FY25 to control the rising credit cost. In the coming quarters, while we expect the credit quality to improve resulting in an improved financing availability, the industry growth may still be single digit in absence of a buoyant financing that the industry had enjoyed over the recent years. Live Events EVs have dominated the headlines, but the numbers still show ICE vehicles holding strong. Are we witnessing a long transition phase, or is the EV narrative running ahead of itself? In the passenger vehicle industry, EV penetration has been around 2% for some time, which we believe is partly a reflection of leading automotive OEMs' absence from the EV market. As they launch their EV models in the coming years, we expect the EV penetration among passenger vehicles to rise. Globally, we have noticed hybrid penetration outperforming EV penetration in recent years. As more hybrid models get launched, we could see a similar trend playing out in India as well. In the two-wheeler industry, despite lowering of demand incentives in recent years, EV penetration has continued to rise. While demand could show monthly volatility as it adjusts to changes in incentives, we believe two-wheeler customers now well understand the value proposition of EVs and we should see a structural increase in its adoption. However, for an accelerated adoption of EVs in the two-wheeler industry, we would need to see commuter and executive motorcycles also getting electrified, which currently looks like a few years away. How do you think India-UK FTA will impact some of our listed players? Most automotive manufacturing plants in the UK are of premium and luxury brands. Hence, we do not see any material impact to India-listed passenger vehicle OEMs. That said, we could see a slightly higher number of premium/luxury vehicles selling in India, which are currently miniscule. In the IT space, do you think the recent bounce in stocks has enough steam left as the Trump administration is working out trade truce agreements with major economies? We believe we are past the trough of negative news cycle related to tariffs and counter tariffs. The economic impact of these announcements are yet to fully reflect. While that is a near-term risk, the year-to-date correction in the Indian IT Services' companies' valuations has brought down their premium over Nifty50's valuation to one of the lowest levels in the last five years. However, their one-year forward earnings growth outperformance over that of Nifty is now the highest that we have seen in almost a decade. Also, the sector is trading at close to the highest dividend yield in the last decade (outside of Covid period) creating a valuation backstop. Hence, in a scenario where the US macroeconomy goes through a shallow recession and then recovers by early 2026, risk-reward balance in the Indian IT services stocks looks favourable to us. Several mid-cap IT names have outperformed the biggies lately. Is this a structural re-rating? This is a trend we have seen particularly post Covid. We believe the growth of some of the midcap IT services companies have structurally improved in the recent years. Part of the reason is enterprises breaking down large contracts in smaller projects in which midcap companies can also now participate unlike earlier. This has resulted in an increase in the addressable market for midcap IT services companies driving their growth higher. Also, some of the enterprises now prefer to bring in a good quality mid-cap IT services company as a challenger to their large-cap IT vendor, both for cost reasons as well as technological innovations. If you had to pick a theme to watch in FY26—AI monetization in IT or EV adoption in autos—what would you bet on? AI monetisation may not translate to higher revenue for IT services companies in FY26 due to macroeconomic uncertainty and cost constraints on enterprise customers. However, in EVs, we will see 1) leading passenger vehicle OEMs launching and ramping-up their BEV models, 2) multiple new EV model launches across two-wheeler OEMs and network expansion, especially post the recent listing of major EV two-wheeler start-ups, and 3) first full year of PLI incentives for EVs being available. Hence, we would expect EV adoption to continue to gain traction in FY26 and to be a key theme in the year.
News18
22-04-2025
- Business
- News18
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 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. First Published:
The Print
22-04-2025
- Business
- The Print
India's consumer sector ready to rebound, earnings to grow by 13 pc in FY26: UBS Report
The report suggested that the sector, which has underperformed in recent years, is now positioned for a recovery as multiple factors align in its favour. New Delhi [India], April 22 (ANI): India's consumer sector is showing signs of a strong rebound, supported by several positive developments, according to a recent report by UBS. It said, 'The consumer sector looks ready to rebound, with several factors aligning favourably, Earnings look set to recover in FY26'. It expects earnings in the consumer sector to grow by around 13 per cent in the financial year 2025-26 (FY26), following a weak performance in FY25, where median earnings growth is estimated to be just 1 per cent. This projected recovery is largely driven by improving earnings, income support measures, and more attractive stock valuations. One of the key growth drivers identified in the report is the potential income stimulus over the next few years. This includes the possibility of lower taxes and the implementation of the Eighth Pay Commission, which is expected to boost the purchasing power of consumers. These measures could lead to a revival in demand across many consumer categories and support a longer phase of earnings growth. The report said, 'Potential income stimulus – lower taxes and the upcoming Eighth Pay Commission over the next three years – could spur a demand revival in many categories and an extended earnings growth phase'. Additionally, the report added that the sector's valuations have corrected sharply–by as much as 35 per cent since October 2024. This makes consumer stocks more attractive to investors, especially in a market that may continue to show low risk appetite. At the same time, if risk appetite returns, the sector stands to benefit from that as well. The report also highlighted how unusual the consumer sector's recent underperformance has been. Typically, this sector performs well during bull markets, as well as during bear markets when investors look for safer, defensive options. However, since the market peak in October 2024, the sector has continued to lag, even as broader markets have sought defensive plays. UBS believes this rare trend now creates a favourable setup for the sector's performance going forward. The main reason for the sector's weak performance has been its inconsistent earnings growth. But the report noted that the input cost cycle and base effects are expected to turn positive in FY26, providing further support for earnings recovery. The report expects a 13 per cent growth in earnings for FY26 and projects an average annual growth rate (CAGR) of 12.8 per cent between FY25 and FY27. (ANI) This report is auto-generated from ANI news service. ThePrint holds no responsibility for its content.
Time of India
22-04-2025
- Business
- Time of India
DMart, Trent, HUL among top UBS picks as brokerage bets on consumer sector rebound in FY26
UBS has turned bullish on India's consumer sector, projecting 13% earnings growth for FY26 and naming Avenue Supermarts , Trent , and Hindustan Unilever as its top stock picks. The brokerage upgraded multiple stocks in the space, betting on a rebound in demand, easing input cost pressures, and income stimulus from tax cuts and the forthcoming Eighth Pay Commission. UBS said the consumer sector has lagged the broader market both in the recent rally and the ongoing correction, which has left valuations looking reasonable, calling the current setup a 'goldilocks' scenario. The brokerage expects FY26 to mark a turning point for the segment, driven by a cyclical earnings recovery and improving fundamentals such as falling inflation, rural wage growth, and fiscal stimulus. Among its preferred picks, UBS favours Avenue Supermarts (DMart) and Trent as 'income stimulus plays' with resilient value retail models that could benefit from rising disposable incomes. DMart, trading at Rs 4,357, was assigned a target price of Rs 5,200 — implying 19% upside — while Trent, last at Rs 5,131, was given a Rs 6,200 target, suggesting 21% potential gains. The brokerage mentioned that DMart is accelerating store expansion and investing in its e-commerce platform, DMart Ready, to adapt to the rise of quick commerce. It expects a revenue and EPS CAGR of 20% and 25%, respectively, for DMart between FY25 and FY27. Trent, which operates the Zudio and Westside retail chains, could benefit from strong store rollout plans and untapped potential in tier-2 and tier-3 cities, according to the brokerage. UBS models a 29% revenue CAGR and 36% EPS CAGR over FY25- 27 for Trent. Among turnaround bets, Hindustan Unilever is a key idea. Once a sector bellwether, HUL has become a laggard in recent years, but UBS sees a recovery ahead. The brokerage expects volume growth to recover to 6-7% in the second half of FY26, aided by easing input costs and a renewed portfolio focus under the new global CEO. The stock, last trading at Rs 2,375, has been given a target price of Rs 2,800. UBS also upgraded Colgate-Palmolive , Godrej Consumer Products (GCPL) and ITC to 'Buy'. The brokerage said it sees Colgate gaining market share in oral care and recovering from a deliberate margin reset, while GCPL is seen benefiting from new product cycles in insecticides and stronger performance in international markets. ITC, UBS said, offers attractive value after its stock corrected on tax fears, with conservative expectations built into its current valuation. Also read | Going contra? IT's time has not come; stick to consumer, infrastructure stocks: Sandip Sabharwal On the other end, Asian Paints , Dabur and Jubilant Foodworks were rated 'Sell' by UBS. It flagged persistent competition and margin pressure at Asian Paints, weak growth visibility at Dabur, and an already-priced-in recovery at Jubilant, despite positive same-store sales growth trends. The brokerage said it believes the broader sector is emerging from a weak phase and could see a rerating as cyclical and structural challenges fade. Despite a slight cut in India's FY26 GDP growth estimate to 6%, UBS said the impact on consumption would be limited, especially as packaged foods, QSR and value retail stand to benefit from the stimulus.
