Consumer stocks extend rally on tax cut; HUL, Asian Paints hit new high

Shares of consumer companies extended their gains logged on Friday, and jumped up to 11 per cent on the BSE on Monday, on expectation of an improved consumer demand after the government announced sharp cuts in corporate tax rates.

Hindustan Unilever (HUL), Nestle India, Asian Paints, Avenue Supermarts (D-Mart), Bata India, Berger Paints, Titan Company, Voltas and Colgate-Palmolive India were among the notable stocks that hit their respective fresh all-time highs on the BSE today.

In the past two trading days, these stocks have rallied in the range of 10 to 18 per cent, as compared to a 9 per cent gain in the benchmark S&P BSE Sensex.

According to foreign brokerage Credit Suisse, large tax-cut gains would benefit among consumer stocks like Avenue Supermarts, Colgate, Nestle, Page Industries, Asian Paints, Crompton, Jubilant Foodworks, Britannia Industries and Hindustan Unilever.

“Unlike in case of the Goods and Services Tax (GST), the government has not explicitly asked companies to pass-on benefits from reduced tax rates to consumers. (Thus) We think companies will be inclined to retain the tax cut benefits to boost earnings. However, this measure will be supportive in the more mature categories (where competition is intense and demand subdued), and companies might utilise any tax savings to fuel growth,” analysts at SBICAP Securities said in a report. 

Echoing similar views, Emkay Global Financial Services said in report that given the weak demand scenario, companies were expected to partially use the tax benefit to improve their volume growth through higher advertising and promotional (A&P) spends. Consequently, any benefit of the tax cut was unlikely to be passed on to customers, with most of the benefits being retained by companies. 

“Lower tax offsets margin concerns, improves earnings visibility and also increases ability to spend aggressively behind new launches. Lower tax improves earnings visibility and helps to further step up ad spends vs. peers to gain share as well as enter new categories,” it added.
 

Company	19/09/2019	Latest	% chg
Page Industries	19535.10	24474.85	25.3
Bombay Burmah	1093.75	1313.60	20.1
Britannia Inds.	2621.75	3112.45	18.7
Avenue Supermarts	1619.25	1917.00	18.4
Berger Paints	366.05	432.25	18.1
Jubilant FoodWorks	1243.55	1468.15	18.1
Westlife Develop	273.60	320.80	17.3
PVR	1574.35	1834.90	16.5
Asian Paints	1554.35	1806.05	16.2
HUL	1811.90	2088.00	15.2
Titan Company	1152.95	1321.35	14.6
TCNS Clothing	650.85	743.70	14.3
GlaxoSmith C H L	7806.80	8876.90	13.7
Colgate-Palmolive	1328.10	1503.00	13.2
P & G Hygiene	10476.40	11850.00	13.1
Crompton Gr. Con	236.80	267.00	12.8
V-Mart Retail	1967.65	2217.20	12.7
Bombay Dyeing	81.90	91.60	11.8
VIP Inds.	434.50	484.00	11.4
Johnson Con. Hit	1770.15	1970.00	11.3
United Breweries	1228.20	1366.80	11.3
Bajaj Electrical	376.50	416.85	10.7
Kajaria Ceramics	535.05	590.95	10.4
Whirlpool India	1676.60	1850.05	10.3
La Opala RG	162.60	179.00	10.1
Kansai Nerolac	458.25	504.15	10.0
Aditya Bir. Fas.	187.65	206.00	9.8
KRBL	218.10	239.40	9.8
Bata India	1529.70	1678.30	9.7
Blue Star	720.20	790.00	9.7
Voltas	625.00	685.10	9.6
Nestle India	12699.45	13913.50	9.6
S&P BSE Sensex	36093.47	39203.89	8.6
Latest price on BSE in Rs at 11:42 am