4 Stocks From Consumer Discretionary Space Which have A Solid Gains Potential

Sharekhan has come-up with its latest report on the Q4FY2022 Results Preview, in which it has analysed the consumer discretionary space. Here are 4 stocks that the brokerage believes are good picks for a solid upside potential.

KPR Mill

Sharekhan is upbeat on is the stock of KPR Mill. KPR Mill is one of the largest vertically integrated and diversified business focus spanning across Yarn, Fabrics, Garments and White Crystal Sugar.

The brokerage has set a price target of Rs 810 as against the current market price of Rs 667.

"Revenue is expected to grow by 17% y-o-y, aided by double-digit growth across businesses. KPR is expected to report 38% growth over pre-Covid level of Q4FY2019," Sharekhan has said.

Gross margin according to the firm is expected to decline by 109 bps y-o-y to 41.3%, while EBITDA margin is expected to contract by 169 bps y-o-y to 22.2% due to a sharp rise in input costs.

PAT is expected to grow by ~6% y-o-y as higher growth in revenue would be mitigated by increased raw material costs.

Arvind

Sharekhan has also placed a buy call on the stock of Arvind with a price target of Rs 183 on the stock as against the current market price of Rs 129.

Revenue is expected to grow by 21% y-o-y, aided by double-digit growth in both textile and advanced material segments due to higher demand from both domestic and international markets. Revenue growth as compared to pre-Covid level of Q4FY2019 is at 8%.

Gross margin is expected to decline by 503 bps y-o-y to 46.5%, while EBITDA margin is expected to contract by 247 bps y-o-y to 10.1% due to higher raw-material prices and other expenses. PAT is expected to grow by 10% y-o-y due to lower interest and tax expenses.

Relaxo Footwears

Sharekhan has also recommended buying the stock of Relaxo Footwears which is the largest footwear manufacturer in India. Its most popular brands - Relaxo, Sparx, Flite & Bahamas are a leader in their space. The firm has set a price target of Rs 1490 on the stock, as against the current market price of Rs 144.

According to Sharekhan estimates, Revenue is expected to grow by 5% y-o-y as price hikes undertaken will have an impact on low-priced footwear products. Higher raw-material prices will lead to a 433 bps y-o-y decline in gross margin to 52.5% and 581 bps y-o-y reduction in EBITDA margin to 16.0%. In line with the decline in EBITDA, PAT is expected to decline by 28% y-o-y.

Rupa & Company

The brokerage is optimistic on the stock and has set a price target of Rs 549, as against the current market price of Rs 484.

"Rupa is expected to register 16% y-o-y growth in revenue, led by high single-digit volume growth and better product mix. EBITDA margin is expected to be lower by 220 bps y-o-y to 17.8%, affected by higher raw-material prices and sub-contracting expenses," the brokerage has said.

According to Sharekhan PAT is expected to increase marginally by 3% y-o-y as higher revenue growth is offset by lower EBITDA growth.

Rupa is one of the top players in the knitwear business with brands like frontline, Euro, Jon etc.