“Most of the Godrej Consumer Products I reckon as consensus positive,” Menon said, describing what he called an “outlier” quarter in which almost every consumer company has performed well.
Staples over discretionary, for now
Menon said he favours staples over discretionary consumer stocks at the moment — not because discretionary businesses are performing poorly, but because staples have lagged and now offer better value after a period of underperformance.
Within staples, Marico is his preferred pick over Hindustan Unilever. He was clear that this is a call on the stock, not the underlying business: Marico’s business “is absolutely performing well,” he said, but its shares now trade at roughly a 12% premium to Hindustan Unilever — a valuation gap he said has “never happened in the history” of the stock.
The firm also expects Honasa Consumer to benefit from improving demand and forecasts that it could deliver its first double-digit revenue growth in nearly three years if consensus expectations are met.
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Asked how an investor with no existing consumer exposure should approach the sector, Menon pointed to three angles:
Bottom-up picks: Jubilant FoodWorks and Radico Khaitan, selected on company fundamentals rather than sector themes.
A multi-year theme:
Alcoholic beverages, which he described as being in a “Goldilocks” moment thanks to more rational, and possibly further, policy changes by state governments.
A contrarian, value-oriented bet: quick-service restaurants, a sector he said is “completely beaten down” and under-followed, even though there’s no clear evidence yet of a turnaround. He named United Spirits as a standout performer within that otherwise weak group, adding he expects a possible inflection “in a new year’s time.”
The brokerage is also constructive on the alcoholic beverages industry, citing supportive policy changes by state governments and continued growth opportunities for domestic players. It prefers Indian companies such as Berger Paint and Allied Blenders & Distillers over Colgate, believing local companies are better placed to sustain growth momentum.
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Paint makers have raised prices by 12-15% even as raw material costs have fallen, but Menon stopped short of calling it a “Goldilocks” setup for the sector. He expects mid-teens revenue growth this year on a mix of volume recovery and price increases, but said margin expansion may be capped by intensifying competition for the industry’s number-two slot — citing the JSW-Dulux joint venture, Berger Paints’ existing position, and Birla Opus.
His top largecap pick in the space is Asian Paints; among smaller names, he favors Indigo Paints and JSW Paints.
Names to avoid: Colgate and Bata
Menon flagged Colgateas a longstanding underweight call, saying that while the company’s performance improved in the fourth quarter, the recovery still looks weak.
On footwear maker Bata India, which has seen repeated management changes, Menon said he remains neutral. “Until proven otherwise, we will still maintain a neutral sort of a thought process here,” he said, adding that even capable management teams have struggled to turn the business around.
For the entire discussion, watch the accompanying video
