Top Performing Consumption Stocks of 2023 so far. Take a Look...

The conversation around consumption stocks continues to be front and center in the mainstream media.

The big drivers of consumption in India are a rising middle class with more disposable income and a shift towards incremental spending.

In fact, the middle class is projected to drive 75% of total consumption in India by 2030.

No wonder consumption stocks are among the safest stocks in the market today. Most of them have low or no debt, they're growing fast, have good margins, cash flows, and return ratios.

Only five out of the thirty stocks in the Nifty Consumption index, have shown negative returns this year.

The top losers include Crompton Greaves (down 11%), Page Industries (down 8%), and Dabur India (down 4%).

On the other hand, the top gainers are up as much as 50%.

Let's take a look at the top five...

#1 Trent

First on the list of top performing consumption stocks is Trent.

A subsidiary of the Tata Group, the company operates retail stores under the brand names Westside, Zudio, Star, and Landmark.

In 2023 so far, shares of Trent are up 54%, making it among the top overvalued stocks in the current market.

At the end of financial year 2023, the company had about 680 stores across 250 cities in India.

In the financial year 2024, the company plans to add over 240 stores with an estimated capex of Rs 8 billion (bn).

As India is one of the world's fastest-growing economies and has the largest youth population, Trent plans to capitalise on the growth in the Indian market.

In line with this goal, the company recently launched 'Samoh', a luxury clothing brand and opened its first store in April 2023.

It also plans to open stores of this brand across the country and take the count from one to ten in a year.

Trent also ventured into emerging sectors like beauty and personal care which will help drive topline growth.

Despite strong economic headwinds such as inflation and rising interest rates, the company's revenue grew by 82.7% in the financial year 2023. The net profit zoomed tenfold.

The growth was primarily led by the company's expansion plans.

With strong financial performance, a promising expansion plan, and a favourable position within the retail industry, Trent is well-prepared to capitalise on the recovery of discretionary consumption in the Indian market.

To know more, check out Trent's financial factsheet and latest quarterly results.

#2 DLF

Next on this list is DLF.

The company is one the leading brands in the Indian real estate sector. It has a vast experience of 75 years in developing residential as well as commercial projects.

It has a strong presence in Gurugram. Gurugram is to DLF, what Mumbai is to Godrej.

In 2023 so far, shares of DLF are up 52%.

The DLF group enjoys low cost and fully paid-up land bank, with well-located parcels across multiple cities and having diverse land usages. This in turn, provides strong visibility of launches.

In the past five years, the company has been reducing debt dramatically, which is often the main reason why a real estate company shuts shop.

At present, its debt-to-equity ratio stands at a respectable 0.1x.

The company is coming off a strong FY23 and it even posted above estimate numbers for the first quarter of FY24.

DLF net profit of Rs 5.3 bn for the quarter ended June 2023 beat estimates and was up from Rs 4.7 bn reported in the same quarter last year.

In the past five years, it has delivered a CAGR of 44% in its net profit.

Going forward, the company is expected to do well as it has a healthy pipeline of residential project launches, close to Rs 200 bn for this financial year.

Some of its launches include a luxury residential project in Gurugram's DLF 5, a high-rise luxury residential development complex going up in the centre of Chennai, a mid or high-rise in New Gurugram's Sector 76/77, and a low-rise residential development project going up in Chandigarh Tri-city.

For more details, check out DLF's factsheet and quarterly results.

#3 Bajaj Auto

Third on this list is Bajaj Auto.

The company is India's third-largest motorcycle manufacturer, with a 12% market share in two-wheelers (19% in motorcycles). The company has a strong presence in the premium motorcycle segment, with a 33% share.

In 2023 so far, shares of the Bajaj group firm are up 40%.

Bajaj Auto has accelerated its sales performance considerably in recent quarters. This is due to a pick-up in demand in the domestic market.

In addition to this, the Pune-based company also launched two locally made high-end Triumph motorcycles. The prices of these bikes are considerably higher than the current average selling price of the company.

Investor sentiment around Bajaj Auto has also received a boost this year due to falling raw material prices like steel. Raw material costs as a percentage of total operational income of Bajaj Auto was 67.9% in FY23.

In FY23, Bajaj Auto formed a 100% subsidiary, Chetak Technology Ltd (CTL) to tap into the thriving electric vehicle (EV) market. This subsidiary is to develop new EV technologies and products and will have its own dedicated manufacturing facility.

Their efforts to capitalise on the booming EV industry seems to be working. Bajaj Auto's domestic sales of its electric scooter Chetak (re-introduced in 2021) grew over four times in FY23, from 8,187 units in 2022 to 36,260 units.

On the back of this success, the company plans to extend its distribution network to over 100 cities and invest in expanding its capacity.

It also plans to invest over Rs 7.5 bn for financial year 2024, a part of which will also be spent on debottlenecking exercises to ramp-up its EV component volumes.

In addition to its strong domestic presence, Bajaj Auto also has a significant international footprint. Bajaj Auto derives 55% of its volumes and 40% of its value from exports.

The company is the largest exporter of three-wheelers and motorcycles in India, and it serves over 79 countries in Africa, Latin America, South Asia, and the Middle East.

To know more, check out Bajaj Auto's financial factsheet and its latest quarterly results.

#4 ITC

Fourth on this list is ITC.

The company is a diversified conglomerate with businesses spanning fast moving consumer goods, hotels, paperboards and packaging, agri-business, and IT.

It's the leading FMCG firm in India and the market leader in the Indian paperboard and packaging industry.

In the agri sector, it's acknowledged globally as a pioneer in farmer empowerment through its wide-reaching agri business. In the hotels segment, it's a pre-eminent hotel chain in India.

In 2023 so far, shares of ITC are up around 35%.

Over the last decade, ITC has successfully created an array of strong brands which are either #1 or #2. They are market leaders in their respective categories.

No wonder it's the Indian stock market's favourite value stock.

After years of underperformance, shares of ITC have shot up in 2023 after the company announced plans to demerge its hotel business.

The company is finally demerging its hotels division into a separate entity. Exiting or demerging the hotels business was a longstanding demand from ITC shareholders. It was gobbling up a lot of capital on account of its capital-intensive nature.

Now that the demerger has finally happened, the company will have more cash to spare which can be used to either pay more dividends or invest in something more productive.

It appears that the company is turning a new leaf now and is expected to derive higher revenue from its consumer business in the years to come.

To know more, check out ITC's financial factsheet and its latest quarterly results.

#5 Colgate

Last on this list is Colgate-Palmolive.

An FMCG company that has maintained its leadership since 1990, Colgate has over 51% market share in toothpaste, 48% in toothpowder, and 30% share in the toothbrush market.

Being an FMCG company, Colgate has remained cash rich over the years and has strong cashflows to dole out regular dividends.

In 2023 so far, shares of Colgate have gained 33%.

Going by the company's annual report, Colgate highlighted it's waiting to capture market share in the oral care category and products under the Palmolive brand.

Segments under oral care including floss and mouthwash in India have significant headroom to grow.

Some impact can already be seen in its first quarter results of FY24 where it reported revenues of Rs 13.1 bn, a 11% growth compared to the same quarter last year while profit rose 30% to Rs 2.7 bn.

Successful execution of its oral care category strategy was one key reason behind this growth.

Going forward, it is planning to increase investments in its core brands and explore new opportunities for growth.

Since you're interested in consumption stocks, check out the entire list of consumption stocks on the NSE here.

You can even use Equitymaster's powerful stock screener to find the best consumption stocks in the market.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...