Stocks Watchlist for the Rising 'Luxury' Theme 

Dear Viewers

I recently came across some interesting news.

As per Fortune India article, in FY24, one in every four Mercedes-Benz cars sold in India was a top end vehicle, costing over Rs 1.5 crore.

What's more, it posted highest ever sales in India in the March quarter.

The management was not prepared for this it seems. Their challenge is that they are down to the last units of their best -selling luxury sedan in India. And they may be out of stock for bestselling product. The new E class is expected to come by the end of the year.

The rise of luxury class in India has taken everyone by surprise. The demand has outstripped supply.

Luxury vehicles sold in India grew 20% YoY in 2023. The growth could have been higher if the supplies were higher.

And this is a broader trend.

SUVs sales are racing past the overall passenger vehicle category volume growth. SUV's share in PVs is expected to rise from 51% to 62% by FY25.

Overall, the average selling price of a passenger vehicle is up 50% in last five years.

And it's not just cars.

The personal luxury market is expected to grow at 12% as per industry reports. That beats GDP growth by a decent margin.

The opportunity is not lost on Western luxury brands like Gucci, Louis Vuitton, Cartier, and others. They are renting space in luxury retail malls and have even signed leases in Jio World Plaza.

The domestic sales volume of luxury houses priced at Rs 4 crore or more was up 75% YoY in 2023.

Once looked down upon as a land of snake charmers, India is now hogging limelight for beating other developed nations in adding billionaires. Mumbai has beaten Beijing on this stat.

And there is more. Last week, 4.71 lac passengers travelled by air - recording the highest single day air traffic ever in the country.

Such news across different sectors is a trend you should take note of.

While FMCG companies are fretting over inflation and slowdown in the growth, the 'premiumisation' theme is gliding on well lubricated wheels.

Well, with a favourable demographic dividend and aspiring millennials, the growth of luxury and premiumization is likely to be a structural trend.

You see, when the income and affordability rise, discretionary consumption takes a disproportionate leap. Money becomes a way to not just meet basic needs, but aspirations, pleasure, and vanity.

People switch to brands. Consolidation happens. Value migration and premiumization unfold.

For investors, this could throw up great investment opportunities.

In an earlier video on this theme, I had highlighted the opportunity in Pricol.

But there are more businesses riding this theme that you should put on your watchlist. Consider Ethos, Brand Concepts, and Titan.

And since we started this video highlighting luxury cars, I would like to spend some time on the company named Landmark Cars - India's premier dealership for premium and luxury cars.

Around 80% of its revenue comes from new vehicle sales. The rest 20 percent is from aftersales, preowned vehicles sales and finance and insurance. Aftersales for the company is annuity kind of business.

Landmark Cars is number one partner for brands like Mercedes, Volkswagen, Renault and BYD. Furthermore, it is well on its way to onboard MG Motors and Mahindra SUV. Diversification across multiple brands is good in case launches in a particular brand slow down, and to mitigate cyclicality. With 12 new launches, it expects significant growth in Mercedes brands sales itself in this year.

The company has been a prominent player in North and West India. And is now expanding presence in the South.

It is also building preowned car business which is profitable already and expected to double in a year.

Landmark Cars has seen 15% year on year rise in average selling price (Rs 20 lac) this year. Average service revenue too was up 13%, at Rs 25,524. After sales revenue in the recent quarter was ~21%. As I said earlier, it's kind of annuity business for the company, growing at 20% CAGR and with returns on capital of 36%.

With 24% return on capital employed, the numbers look good. In last two years, i.e., from FY21-FY23, revenue has grown 73% and net profit is up 667%. Its debt-to-equity ratio is at 0.7 times.

The stock is trading at a PE of 44 times.

Please note that none of the stocks mentioned in this video imply any Buy, Hold or Sell view. The purpose is to make you aware of potential plays on themes that are doing well.

With this, I have come to the end of this video. Let me know through your comments and likes if you found this information useful.

Thank you for watching.

Goodbye.