Whats common to HUL, Asian Paints, Varun Beverages? Jefferies picks them as contra bets

Kolkata: Consumer firms flourish when the economy is on an upswing, consumer confidence and demand are high in an economy. Though the Indian economy is the fastest growing major economy in the world, private consumption has not been up to the mark over the past several months. This had an impact on the stocks of consumer item firms. However, with the finance ministry and Reserve Bank of India unleashing a pincer attack on sluggish demand through major income tax relief and slashing on interest rates and paving the way for cheap loans, aggregate demand i expected to rise in the economy.

It is against this backdrop that brokerages major Jefferies has identified three consumer-driven stocks which can benefit and may be concealing a significant upside. These are HUL, Asian Paints and Varun Beverages. It has labelled these three stocks are "fallen angels" and thinks that they might be contra-ideas for the next one year. It has rerated these stocks from 'underperform' to 'buy'. The brokerage admits that the stocks are not cheap but there could be an upside from the current levels. Even if it does not happen, the downside will be limited, Jefferies said.

Hindustan Unilever: On July 11 morning, HUL was trading at Rs 2,524.40, up Rs 116.00 (or 4.82%) around 10:50 am. Its 52-week high and low are Rs 3,035.00 and Rs 2,136.00 respectively. It has been under pressure on a few fronts and the stock price has been more or less flat for a few years. "The recent change in stance by management on prioritising growth over margins along with parent's high focus on India should set the stage for recovery, and we retain buy," Jefferies mentioned.

Asian Paints: Asian Paints, the leading paints company in the country, was trading at Rs 2,472.30, up Rs 21.10 (or 0.86%) around 11 am on July 11. According to reports, the position of Asian Paints was under threat after Kumarmangalam Birla launched Birla Opus. The offensive from this new competitor was launched when the market was suffering low growth rates and going through high input costs. "While Birla Opus will continue to ramp-up, we believe that the easy gains are already captured and expect a gradual recovery in earnings starting FY26 for Asian Paints," said Jefferies. It mentioned a target price of Rs 2,830 for the stock, the 52-week high and low for which are Rs 3,394.90 and Rs 2,124.75 respectively.

Varun Beverages: This company is the most prominent bottler and distributor of Pepsico in India. Competition weighed on the stock; so did faltering summer, thanks to the abundant rains. The stock is now attractive says Jefferies. On the morning of July 11, it was trading at Rs 452.20, down Rs 7.55 (or 1.64%). The 52-week high and low prices of this stock are Rs 681.12 and Rs 419.55 respectively.

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