10 consumer stocks see 3-19% target cuts, one raised by BNP Paribas; any guesses?

BNP Paribas, in its latest note, trimmed target prices for 10 consumer stocks, including ITC Ltd, Dabur India Ltd, Hindustan Unilever Ltd (HUL) and Godrej Consumer Products Ltd, by 3-19 per cent. It raised its target for jewellery maker Titan Company Ltd.

BNP's preferred consumer picks included Britannia Industries, Titan and DOMS Industries and suggested 14-24 per cent upside targets. The brokerage has downgraded HUL, which has been a laggard in growth and faces a relatively higher cost inflation. It upgraded Marico, which it said is well-positioned for margin uptick amid Copra Downcycle. 

"We have moved our valuation multiples to 1SD below last decade average for companies with larger exposure to crude. In our discretionary coverage, our positive view on Titan and negative view on Jubilant Foodworks Ltd remain unchanged," BNP Paribas said.

For ITC, it set the target price at Rs 360. HUL is expected to test Rs 2,300 level. Target for Titan Company is set at Rs 5,070.  Here's the complete list:

Indian consumer staples, said BNP Paribas, seemed well positioned for an earnings recovery in FY27. The overall near term outlook has now deteriorated due to the West Asia conflict and the spike in oil price. 

That said, in the past oil price spike periods such as the ones in 2008, 2011 and 2022, staples emerged as a relative outperformer with smaller earnings cuts. 

"This time around the sector has seen a sharp valuation de-rating and most stocks are trading at valuations last seen a decade back. Also, the sector is well placed to raise prices, especially in the segments that saw GST rate cuts. We maintain our positive view on the sector, but the reason has changed from an earnings-inflexion thesis to safety amid the risk of high energy cost pressure and improved valuation comfort after the recent de-rating," it said.

BNP Paribas said  Q4 numbers for staples will likely reflect the improving outlook for domestic consumption, which is confirmed in the updates from Marico, GCPL and Dabur. 

"We expect double-digit aggregate Ebitda YoY growth for the first time in the last 10 quarters. However, commodity cost pressures have started building and the inflation spike in 1HFY27 could negate the margin improvement we were earlier building in. Ceasefire in the war has reduced the risk of a further increase in the oil price which could have raised the risk of demand destruction," it said. 

BNP Paribas said even in 2010-2013 when oil price remained elevated, staples outperformed, relatively, showing earnings resilience. It is building in the higher commodity costs in 1HFY27, and its FY27E earnings estimates are now below consensus.