Band, Baaja, Baaraat: Top Stocks to Watch this Wedding Season

Big fat Indian weddings, as fun as they are, are not easy on the wallet!

Yesterday, as I sat sipping on a cup of tea, my wife mentioned that she has to buy a new outfit for her friend's sister's wedding next month.

Before I could remind her about all the apparel she already possesses, she said she will need one more outfit and matching shoes for another friend's wedding because she couldn't be caught dead wearing the same clothes!

And then, there is our cousin's wedding this week where he has invited us to a 5-star hotel which means, we would be obliged to gift him something painfully exorbitant.

This got me thinking. If my family and I are spending tens of thousands of rupees during the wedding season for functions that are not even our own (my wife's friend's sister's wedding!), then just like me, there are millions more doing the same.

Picture this - Mr. Mohnish Vora is set to get married in December this year in Mumbai.

Mohnish buys a pair of gold earrings for each of his three sisters, a colleague of Mohnish could gift him a watch. Mrs Sharma, his neighbour, might buy a pair of new shoes and a saree. His younger brother gets his first suit stitched. Uncle Vinod flies down from Delhi carrying a bottle of the best single malt. Even his driver Bitoo ends up buying a new saree for his wife to wear for the function.

Wedding spends truly have a positive multiplier effect as Indian weddings pump large money into the wedding "economy."

November marks the start of the great Indian wedding season and it extends all the way to April.

And this year could be even bigger as we move past the pandemic and get back to business as usual.

India is set to have a full-fledged wedding season with all the glitz and vitality it missed the previous two years.

Over 3 million weddings are expected to take place over the next month in India. According to the Confederation of All India Traders, it will generate business of at least Rs 3.7 trillion (tn).

And that's just phase one of the wedding season. The next phase of the wedding season will start from January and continue till April 2023.

And if you think about the multiplier effect, that could mean tens of millions of customers purchasing everything from clothes to gold, watches to consumer electronics and so much more over the coming months.

Savvy equity investors know the Indian wedding season by another name - the gold rush.

If we are going to empty out our pockets this wedding season, how about we find a way to get our money back and maybe, much more?

After all, aren't some companies going to benefit immensely from this massive spend?

This year, while we enjoy the wedding festivities, let us also find the hidden opportunities that we can take advantage of in stocks linked closely to weddings.

Here are the sectors and their specific stocks that could benefit from the great Indian wedding season.

Apparel

Historically, the celebration-wear category is the least impacted even in times of inflation or recession as Indians like to celebrate weddings, festivals, and other occasions as life-time events.

The wedding season accounts for around 20% for the overall clothing industry sales but for certain companies that cater especially for this category, the season is a major contributor to revenue.

With weddings getting bigger and pre-and-post wedding functions also being held, it's turning out to be a thriving time for apparel companies.

The top two apparel companies to watch out for on our list are:

#1 Raymond Ltd

Raymond Ltd is one of the leading players in the suiting business with a market share of over 60%. It is also the largest branded fabric player in the organised shirting segment.

Since suits are a wedding staple, the company stands to benefit from the increase in weddings.

For the September 2022 quarter, the company reported an 86% jump in standalone revenue to Rs 15.1 billion (bn) (Rs 1,519 crore) against Rs 8.1 bn in September 2021.

Profit after tax zoomed almost 300% to Rs 1.1 bn compared to Rs 280 million (m) in the year ago period.

The stock has had a great run on the bourses and gained 154% over the last 12 months. Currently it trades just below its 52-week high at Rs 1,300 levels.

#2 Vedant Fashions Ltd

Vedant Fashions caters to the Indian celebration wear market with a diverse portfolio of brands such as Manyavar, Mohey, and Manthan.

It's well positioned to tap into the large and growing demand for wedding finery over the next few months, with its strong brand franchise.

The Indian wedding and celebration market is relatively less price-sensitive compared to casual wear. Thus, the company generates healthy gross margins (over 72%) with no end of season sale or discounts offered on MRP.

For the half year ended 30 September 2022, the company has reported an increase of 52% in total income to Rs 5.8 bn, and a 73% increase in net profit to Rs 1.7 bn compared to September 2021.

Since its listing in February this year, the stock has gained 55% and is currently trading at close to Rs 1,350 levels.

Jewellery

While every Indian wedding is unique in its own way, jewellery plays a major role in each event with some estimates that families spend as much as 20% of the wedding budget on jewellery.

The season make family, friends and even guests flock in large numbers to jewellery stores for the happy events.

Indian brides take jewellery to an extravagant new level, dripping in spectacular hair accessories, nose rings, earrings, necklaces, and amulets, sometimes to the point where you'll see more gold than their face!

The top two jewellery companies to watch out for this wedding season are:

#1 Titan Company Ltd

No surprises here as no jewellery company list would be complete without Titan, one of the largest retailers of watches and jewellery in India.

For the financial year ended 31 March 2022, the Nifty 50 company derived almost 88% of its revenue from its jewellery division. It sells jewellery through its brands Tanishq, Zoya, Mia, and Caratlane.

The company's watches also see strong demand as a popular gift during the wedding season.

Titan reported a 22% rise in revenue to Rs 87.3 bn in the September 2022 quarter against Rs 71.6 bn in the year earlier. Net Profit for the same period was up 34% to Rs 8.5 bn as compared to Rs 6.4 bn YoY.

After a stellar run on the bourses in 2021, the stock performance has been rather muted gaining only 5% this year. A PE ratio of 75 could be a factor that may be limiting investors interest in the stock.

#2 Kalyan Jewellers India Ltd

Kalyan Jewellers is one of the oldest business families in India with a family legacy of over a century since 1908.

Having ventured into jewellery retailing in 1993 in Kerala where the company is headquartered, as on 31 March 2022, Kalyan Jewellers has over 150 showrooms spread across India and GCC.

The company had reported significant growth in revenue and profit in the December, quarter of 2021 due to the wedding season with revenue and profit jumping 15% and 74% respectively over the September 2021 quarter.

It remains to be seen if the company could repeat such a performance this year. The company reported revenue of Rs 28.4 bn and profit after tax of Rs 950 m for the second quarter of FY 2023.

The 52-week high and low of the stock is Rs 109.5 and Rs 55.2 respectively. Currently, the stock trades just above Rs 100, up 51% since the beginning of the year.

Consumer Electronics

Another sector that gets a big boost from the wedding season is the consumer electronics.

Typically, in India, the festive season starts from Onam, covers Durga Puja and with Diwali, contributes around one-third of the overall annual sales value across categories of the industry, which is estimated to be around Rs 750 bn.

But the sales continue to remain elevated as the wedding season follows immediately after right up to March.

Electronic items such as televisions, air conditioners, refrigerators, etc, are popular purchases by the bride and groom or as a gift given by family and friends on the occasion.

Here are the two consumer electronics companies that you should add to your watchlist.

#1 Voltas Ltd

Voltas, a Tata group company is the undisputed market leader in the Room Air Conditioner category for more than a decade, consistently maintaining the No. 1 position, and has steadily maintained its lead over the competition.

Founded in 1954, the company is also globally recognised as an engineering solutions provider and a project specialist. It enjoys a strong presence across India, the Middle East, South East Asia, and Africa.

The company reported a consolidated net loss of Rs 74 m in the quarter ended September 2022 as against net profit of Rs 1.0 bn during the previous quarter ended September 2021.

Sales rose 4.2% to Rs 17.4 bn in the quarter ended September 2022 as against Rs 16.6 bn during the previous quarter ended September 2021.

2022 has been a disastrous year for the stock which is down 34% since the beginning of the year.

Read our article on why Voltas share price is falling to know more.

#2 Dixon Technologies (India) Ltd

Dixon Technologies is an Indian multinational electronics manufacturing services company listed on the exchanges since 2017.

Dixon is a contract manufacturer of televisions, washing machines, smartphones, LED bulbs, and CCTV security systems for companies such as Samsung, Panasonic, Bajaj, and Philips. It has 17 manufacturing units in India.

An LED TV might be a common purchase during the wedding season but have you ever wondered which company manufactures TVs for the market leaders, Xiaomi, and Samsung?

No guesses here. Dixon is in fact, the biggest manufacturer of LED TVs in India for the likes of Samsung, Panasonic, Xiaomi, TCL, OnePlus, and many more with over 15% of all TVs sold in India assembled by the company.

The company expects healthy volume growth at 24% YoY to 3.6 m units in FY23.

In September 2022, Dixon signed an agreement with Google to sub-license rights relating to Android & Google TV, which could strengthen its position even further in the LED TV category.

Net profit of Dixon Technologies rose 23.3% to Rs 772.5 m in the quarter ended September 2022 as against Rs 626.4 m during the previous quarter ended September 2021.

Sales rose 37.9% to Rs 38.6 bn in the quarter ended September 2022 as against Rs 28.0 bn during the previous quarter ended September 2021.

The stock has given a phenomenal CAGR of 51% since its listing in 2017. This year, however the stock has underperformed the market and is down almost 18% till date.

Hospitality

Hotels with wedding halls or open spaces, can host multiple weddings on a single day. Weddings are generally preceded and followed by customary ceremonies which too, many a times are hosted at the same location.

Elaborate ceremonies can last up to a week translating to confirmed F&B and room revenues. Over the years, weddings have become a significant contributor to total revenues generated by the hotel industry.

According to reports, 2.5 million marriages may get solemnised during the wedding season this year with tariffs at hotels up by a record 25-30% over 2019-20 levels.

The stock to watch out for in the hotel industry is none other than Indian Hotels Company Ltd.

#1 Indian Hotels Company Ltd

Among the best hotel stocks in India, the Indian Hotels Company Limited (IHCL) is South Asia's largest hospitality company by market capitalisation.

The iconic brand Taj Hotels was ranked as the world's strongest hotel brand and India's strongest brand across sectors as per Brand Finance, a global leading brand valuation consultancy in 2022.

The demand outlook for IHCL continues to remain strong and IHCL has a pipeline of strong room additions. This would enable robust growth. Demand is expected to outpace supply, and this could increase room rates.

Tata Group's hospitality arm Indian Hotels Company Ltd posted a record profit of Rs 1.3 bn in the second quarter of FY23 compared to a loss of Rs 1.1 bn in the previous year. Its revenue grew to Rs 12.5 bn, a 67% growth year-on-year.

The stock has risen 68% since the beginning of the year following fund raising in FY2022, and significant improvement in operating metrics in the first two quarters of FY2023.

Two Wheelers

Motorcycle manufacturing companies often look forward to the wedding season as it is a major contributor to their sales and performance for the year.

One must bear in mind that over 40% of the two-wheeler market is in rural and semi-urban areas and it is very common for a groom to either purchase or be gifted commuter bikes on the occasion.

People in rural areas invest in two-wheelers at the time of marriages as buying a two-wheeler is luxury after all for them.

In recent times, the outlook for two-wheelers, especially in the commuter segment has remained grim. Rising inflation, fuel prices being relatively higher and overall consumption getting hit at the bottom of the pyramid has kept a large chunk of the overall market away.

But companies are banking on the wedding season to help once again revive demand this year.

Here is the two-wheeler company to add to your watchlist...

#1 TVS Motor Company Ltd

TVS Motor Company, the flagship company of TVS Group is the third largest two-wheeler manufacturer in India.

It has an annual sale of more than 3 m units and an annual capacity of over 4.95 m vehicles. TVS Motor is also the 2nd largest exporter in India with exports to over 60 countries.

The company manufactures the largest range of 2-wheelers, starting from mopeds, to scooters, commuter motorcycles to racing inspired bikes.

TVS Motor Company witnessed a standalone net profit of Rs 4.1 bn in the quarter ending September 30 2022 compared to a profit of Rs 2.7 bn, registering a growth of 46.7% YoY. Q2 PAT also climbed by 27.1% from Rs 3.2 bn in the preceding quarter.

Shares of the company are trading close to their 52-week high of Rs 1,177. The stock price of the two and three-wheeler company has zoomed 116% from its low of Rs 513, that it had touched on 7 March 2022.

Should You Invest in Wedding Related Stocks?

If there is one industry that is not impacted by the highs and lows of the economy, it's the Indian wedding industry. Indians are known to spend lavishly on weddings, come rain or sunshine.

This makes wedding related stocks extremely lucrative for investors.

However, one must realise that demand for these products or services is seasonal.

The revenue of the companies in this space may also depend on other factors other than demand.

Therefore, one must view wedding stocks with the same amount of caution as one would view other stocks. Sustained research must not be compromised despite the positive odds.

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...