With an increasing number of youngsters joining the workforce across the Asia Pacific region, consumption trends are expected to evolve. Global brokerage and research firm CLSA believes that Generation Z — as the people born in or after 1995 are referred to — will dictate what consumers spend on once they start reaching peak earnings by 2030. The brokerage firm highlighted that as Gen Z reach their peak earnings, per capita consumer expenditure in Asia will have risen to $5,832, up from $3,268 in 2020. To bank on this shift in dynamics, the brokerage firm has picked 23 Asia stocks to play the Gen Z theme, with the second-highest weightage to India with four stocks.
Stocks to buy
Target price: Rs 2,600
CLSA believes Hindustan Unilever’s acquisition of GSK is a well-timed bet. Since the business takeover, CLSA believes HUL has strengthened the product efficacy and leveraged opportunity. The company commands a strong market share in beauty and personal care products, homecare, hot drinks, packaged food, and soft drinks.
HUL is also expected to see a lift for its health & hygiene products. “While some of the hygiene trend like hand sanitiser is likely to fade, HUL has always been calculative with its approach. Pandemic has also boosted prospects of its core Soap offering, which has been an area of concern for Unilever,” CLSA said. Further the pandemic is also expected to aid its packaged food segment. “Given long-term category and country potential and management actions to accelerate growth, we are structurally positive on HUL, given a favourable portfolio mix, better execution, and upside from the acquired nutrition business. Our September 2021 target price is Rs 2,600, based on 57x Sep-22 earnings,” they added.
Target price: 2,285
The company’s focus on value products is expected to boost its market share. CLSA says that Asian Paints is attempting to make an aggressive shift from a ‘product-centric’ company to a ‘service-oriented brand’. The company has gradually expanded from paints to services and now the lighting, furnishing and furniture segments with an attempt to provide a holistic experience to consumers addressing all their decoration needs.
“We continue to see Asian Paints’ initiatives to drive market share gains through a widening presence in the value segment with expanding distribution reach, service capabilities and its ability to create new segments aiding its market share gains,” CLSA said. Given the structural opportunity, Asian Paints is CLSA’s preferred pick in the discretionary segment with a target price of Rs 2,285 per share, based on 60x Sep’22 earnings.
Dabur has been scaling up its focus on the herbal play in the FMCG segment. Along with modernizing Ayurveda products, Dabur is strengthening its portfolio and distribution networks to help spur expansion. “We expect the healthcare segment to lead growth for the company, with this part of the business contributing 39% of FY23CL revenue (from 32% in FY20),” CLSA said. Dabur is expected to penetrate further into the FMCG segments and focus more on its ayurvedic offerings going ahead.
“We have been positive on Dabur given its differentiated herbal and healthcare play in Indian consumer. Post the pandemic with rising healthcare awareness and people increased inclination towards Ayurveda, we see Dabur is a clear winner,” the report said.
Target price: Rs 3,000
The parent company of Domino’s Pizza in India has been scaling up with not only aggressive expansion of core business but also expanding brand and cuisine offerings and geographical reach. The company has also picked a stake in a competition firm, Barbeque Nation and is expected to see gains from that once normalcy comes back. During the pandemic, the company was successful in leveraging the consumer need for safe options.
“The Company has significantly transformed the perspective of the company with an added revenue stream. As most of the actions are nascent, it’s difficult to capture in the model,” CLSA said. The brokerage firm ascribes 70x PE valuation multiple, to arrive at the March 2023 target price of Rs 3,000 per share.
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