Guotai Junan: India's consumer industry enters a high-growth period, with strong performance from expanding and growth-oriented enterprises in three categories
Guotai Junan Securities released a research report analyzing that the Indian consumer industry is experiencing rapid growth, mainly driven by demographic dividend, massive capital expenditure, and active consumption. The report points out that India is the world's fifth largest economy, with a GDP of $3.57 trillion, and consumer spending accounts for 60% of GDP. Three types of well-performing companies include growth-oriented enterprises focusing on industry expansion, enterprises expanding globally to explore new profits, and domestically strong enterprises
According to the information from Zhitong Finance and Economics APP, Guotai Junan released a research report stating that India is the fastest-growing emerging economy in the world. Benefiting from massive capital expenditure, active domestic consumption in India, and the demographic dividend, India's GDP growth rate has been among the top globally in recent years, nurturing competitive industries such as IT, pharmaceuticals, agriculture, automotive, clothing, and film. India's development trajectory and successful experiences are worth learning from. Industries focusing on expansion and growth, global expansion, and the strong performance of local established companies have shown good stock performance.
Key Points from Guotai Junan:
Currently, India is the world's fifth-largest economy, with a total GDP of $3.57 trillion, ranking only after the United States, China, Japan, and Germany.
From an economic structure perspective, India shows a feature of "well-developed tertiary industry and relatively weak secondary industry," with final consumer expenditure accounting for 60% of GDP, making consumption the "first driving force" of India's economic growth. The five core drivers of India's vibrant economic and consumption growth are: demographic advantage (continuously expanding population, abundant young labor force), industrial advantage (highly competitive industries such as IT, pharmaceuticals, agriculture, automotive, textiles), economic reforms (India has released economic growth vitality through various reform measures), income increase (growth in middle to high-income households, continuous growth in disposable income), and seizing opportunities in the international industrial chain (actively attracting foreign investment, undertaking industrial transfers).
From the perspective of "industry review," this report focuses on seven major consumer industries in India (food and beverage, agriculture, beauty and personal care, retail, automotive, home appliances, textiles and clothing), tracing the evolution of Indian consumption.
Before the 1990s, India implemented various tariff barriers to protect domestic industries, leading to slow economic and consumption market growth. It wasn't until 1991, when the Rao government implemented comprehensive economic reforms, absorbed foreign investment, and continuously increased the degree of openness; after the Modi government took office in 2014, it more actively promoted economic reforms through initiatives like "Monsoon Plan" and "Digital India," propelling the Indian economy and consumption market to soar again. Several niche industries entered a high-growth period, with the Indian alcoholic beverage industry market size achieving a CAGR of 9.6% from 2008 to 2019, the Indian food industry achieving a CAGR of 13% from 2010 to 2018, the Indian beauty and personal care industry achieving a CAGR of 10% from 2016 to 2022, and the Indian automotive industry achieving a CAGR of 6.5% from 2006 to 2023.
From the perspective of "valuation review," this report outlines the stock price changes and leading valuation changes (PE/PS, etc.) in various consumer industries.
The consumer industries in India with good stock performance include three categories: ① Growth tracks actively seizing industry expansion dividends: for example, Nestle India and Britannia in the food industry, Hindustan Unilever and MARICO in the beauty and personal care industry; ② Continuously exploring new profit growth points through overseas expansion and globalization: for example, Tata Motors in the automotive industry, with the popular brands Land Rover and Jaguar selling well overseas; ③ Established advantages of local Indian industries: for example, RAYMOND and Page Industries in the textile and clothing industry. These three types of companies have shown better stock performance, with significantly higher valuation premiums Risk Warning: Differences in national conditions between India and China lead to different paths for corporate development; global economic downturn pressure leads to a slowdown in consumer market growth; the effectiveness of domestic consumption promotion policies is lower than expected