Summary of "2 Evergreen Sectors at discounted valuations | No Risk of Tariffs | For Portfolio"

2 Evergreen Sectors at Discounted Valuations | No Risk of Tariffs | For Portfolio

Key Finance-Specific Content Summary

Macroeconomic & Market Context

US Tariffs Impact on India: Despite threats of tariffs up to 50% by the US, Indian markets showed minimal reaction. According to an SNP Global report (dated 14 August 2025), India’s economy is less reliant on exports (only 2% of GDP exported to the US), and 60% of growth is driven by domestic consumption. Some sectors like pharmaceuticals and consumer electronics are exempt from tariffs. The Indian government plans a Rs 25,000 crore Export Support Mission (pending Finance Ministry approval) to counter tariff effects. India’s sovereign credit rating was upgraded from BBB- to BBB, reflecting a stable outlook despite tariffs.

Sectors Discussed

Gold and Diamond Jewellery Sector
- Faces tariff-related headwinds but majority revenue is domestic, limiting impact.
- Example companies:
  - Sanco Gold Limited: Margins impacted previously due to inventory losses from tariff changes but expected to recover in the next two quarters (base effect from weak profits in Sep & Dec 2024).
  - Sky Gold & Diamonds Ltd: Growth driven by acquisitions (Carat Lane, Reliance JVs, PN Gadgil, Indriya of Aditya Birla Group) and capacity additions.
- Valuations have become attractive due to tariff-related concerns, presenting value opportunities.
Fast Moving Consumer Goods (FMCG) Sector
- Considered an evergreen sector with premium valuations and resilient demand.
- Key long-term growth trends include:
  - Rural market growth outpacing urban; rural and urban consumption basket size grew ~60% in the last 2-3 years.
  - Quick commerce (Q-commerce) contributing 70-75% of the e-grocery market, up from 35% in 2022; online grocery market projected to grow at 32.7% CAGR through 2032.
  - Food & beverage segment contributes ~3% of GDP; non-alcoholic beverages under-penetrated (India’s per capita consumption ~6x less than developed countries) with growth estimates of 8.5%-11.5% CAGR to 2030.
  - Dairy and value-added products growing 11-13%, with a healthy outlook into FY26.
  - Premiumization and health-conscious products gaining traction, driven by rising affluent and HNI population willing to pay premium.
- Short-term headwind: Margin pressure due to inflationary raw material costs, but many companies show signs of recovery.

Company & Investment Highlights

Large Caps (> Rs 1 Lakh Crore Market Cap):
- Hindustan Unilever Ltd: Market leader in home care and personal care; growth expected to be modest due to large base and lack of growth triggers; inflationary costs had minimal impact on margins.
- ITC Limited: Diversified across FMCG, cigarettes, paper & packaging, agri-business; recently demerged hospitality; growth expected muted due to large size.
- Varun Beverages Ltd: Strong growth in sales and net profits over 1-3 years; key player in global beverage industry with PepsiCo franchise rights in 10 countries; >90% of Pepsi sales in India through Varun; undervalued as current P/E is below 3- and 5-year median P/E; attractive large-cap opportunity.
- Tata Consumer Products Ltd: Premium products with health focus (Organic India acquisition, Himalayan brand), presence in tea, coffee, non-alcoholic beverages, and Starbucks franchise in India; suitable for positional trading.
Mid-Sized Companies:
- Godfrey Phillips India: Primarily tobacco revenue; volatile due to tax fluctuations and sin business nature; fairly valued relative to growth.
- Bikaji Foods International: Impacted by inflation but recovering; JV with Nepal’s CG Group; rapid expansion adding 15,000 outlets in 3 months (total 3.26 lakh outlets); leader in sweets and namkeen; entered premium gifting segment via Hazel Nut Factory acquisition; margins expected to improve with easing raw material costs.
Small Caps:
- Miz Vectors Food & Specialties Ltd: Strong brand in bakery segment in North India; expanding geographically; premium and health-focused products (e.g., Zero Maida Bread, natural bread with no palm oil/preservatives); currently margin pressure expected to recover soon; fairly valued relative to industry P/E.
- Manorama Industries: Operates in cocoa butter and chaya butter segments (food and personal care applications); significant capex underway; potential watchlist candidate.
- Strop Brands Ltd: Brands like Scrap and Act2 with good market acceptance; recent acquisition of DEMT; management changes with significant stake acquisitions by DMPL and BSM Private Limited.
- Wilal Industries Ltd: Ice cream segment with good brand acceptance; launched value-added products; cyclical business with seasonal revenue trends; potential volatility risk.
- Other small caps mentioned for study: Sun Brand Ltd, BDL Industries, Mrs. Bector Foods.

Investment Methodology / Framework Highlighted

Focus on sectors with:
- Resilience to tariff risks or no tariff impact.
- Emerging value due to market overreaction or short-term headwinds.
- Long-term structural growth drivers (e.g., rural consumption, premiumization, health trends).
Valuation approach:
- Compare current Price-to-Earnings (P/E) with historical 3-year and 5-year median P/E to identify undervaluation.
Monitor promoter buying and business fundamentals via platforms like Sovran (offering premium features free for 90 days) for small and microcap discovery.
Use buckets such as aggressive growth triggers, promoter buying, excellent results, and order book data for decision-making.
Consider base effects in quarterly results for earnings growth outlook (e.g., tariff-induced profit dents creating a low base).

Disclaimers & Disclosures

Investments are subject to market risks. The presenter is not a SEBI registered advisor; content is for educational purposes only. Viewers are encouraged to do their own research before investing.

Presenters / Sources

Presenter: Sushil (host)
Data/Report Source: SNP Global report dated 14 August 2025
Investment Platform Featured: Sovran (for small/microcap research and portfolio tracking)

Summary

The video discusses two evergreen sectors—Gold & Diamond Jewellery and FMCG—that currently offer attractive valuations amid tariff uncertainties. Indian markets are relatively insulated from US tariffs due to domestic consumption-driven growth. FMCG is favored for its long-term structural growth supported by rural demand, quick commerce expansion, premiumization, and health trends, despite short-term margin pressures.

Specific large, mid, and small-cap companies are analyzed for growth potential and valuation attractiveness, focusing on those aligned with sectoral trends and resilient business models. The video encourages using detailed research tools and valuation comparisons for investment decisions while emphasizing risk awareness and disclaimers.