Stocks to buy this festive season
If I ask you to name the top industries of India, you can name steel, banking, auto, IT etc.
But what marriage industry Cross your mind as one of the top industries in India?
According to the Economist’s estimates, the annual expenditure in the Indian wedding industry is expected to cross US$130 billion during this season.
To be honest, I had no idea that Indians take marriage so seriously.
The marriage industry is the fourth largest industry in India ahead of cars, steel and technology.
Well, it seems that Indians take the process of getting married very seriously.
Over the weekend, I wanted to know more about the opportunity, scale, margin and more. I called my cousin, a successful wedding planner who has been named among the top 10 wedding planners in India according to the Times Sutra Awards.
My questions were straightforward and mainly aimed at understanding two things.
The first was the development of the marriage industry and how sustainable it is. The second was the sub-segment that would benefit investors the most.
The numbers my cousin told me were unbelievable to be honest.
He did not agree with the idea of suppressed demand. Generally people postpone marriages for 6-9 months. The Covid restriction on the number of guests lasted till March 2022.
Therefore, in his opinion, most of those who had postponed got married within those restrictions. So only 5-10% of marriages were postponed.
On the question of increase, he said that according to his calculations in the marriage season (March to May or June) this summer, there has been an increase of 150 per cent in expenditure.
He expects the winter wedding season to be even bigger, with an estimated 200% increase in revenue for wedding intermediaries.
The vendor range is huge, obviously ranging from jewelry (gold and diamonds) and traditional attire to indirect plays such as two-wheelers, cars, hotels and liquor companies.
So, with these inputs, I shortlisted a few stocks from the marriage industry sub-segment as well which would benefit the most.
Readers will agree that I generally prefer my articles. Combination of Development and Appropriate Evaluation, I believe that growth in investment and valuation of companies is perhaps the most important factor. But knowing about valuation is also very important.
Once growth stops, valuations will drop and the stock process will crash.
Firstly, the jewelery stock would be the obvious choice for most people to play the wedding season because of the titan.
If you walk through any Titan store, you will notice that there is a rush to buy both gold and diamond jewelry during the wedding season. After all, trust is the most important thing when it comes to expensive jewelry and who would you trust more than Tata.
However, if you look at the valuations, you will feel a bit uncomfortable.
Now a lot of people will tell me that Titan stock was and will always be expensive.
While I couldn’t agree more, the point I’m trying to make is this…
Titan is priced for perfection.
I’m sure it will do well over the long term, but the alpha investors are looking for won’t come from Titan.
In fact, Kalyan Jewelers or Thangamayil Jewelery can give you better opportunities.
Now if you look at Kalyan Jewelers numbers, you must be wondering what I am talking about. It hardly even makes a profit.
My point is that two or three good seasons of marriage can change the fortunes of this stock.
Or consider South India-based Thangamayil Jewellery, which has an ROE and ROCE of 13% and 12% respectively and a P/E ratio of 28 times.
To make a long story short, supernatural growth in an industry will rate smaller players higher than the market leader, where optimism is already fully built.
While jewelry stocks are the obvious choice, I found certain hotel stock The major part of whose income comes from marriages.
It’s a safe bet as room occupancy numbers are already exceeding pre-Covid levels, with most hotels anticipating a strong winter season.
Again, looking at hotel stocks like Indian Hotels and EIH Ltd from a wedding industry perspective would be too far-fetched.
So why not look at hotel stocks listed alone or smaller, regional hotel chains?
Hotel stocks like Sinclair Hotels and Royal Orchid are better placed to play the upcoming wedding season. They will also get a boost from the increase in travel post Covid. This has become an ongoing factor and it is not just because of stagnant demand.
If you think of a hefty Indian wedding budget, I am sure you will agree that the highest spending order will start with the wedding venue. As mentioned above, these are standalone hotels.
This will be followed by jewelery ie small and medium sized jewelery stocks.
This is where most of the budget is allocated.
There are some other obvious names like Vedanta Fashion (Manyavar) which I am not going to discuss in this article.
Well, this is how you can sport the big fat Indian wedding theme which is going to explode this winter.
But be aware of the evaluation, dear reader. You may not end up buying market leaders that are priced to perfection.
Disclaimer: This article is for informational purposes only. This is not a stock recommendation and should not be treated as such.
This article is syndicated from equitymaster.com,
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)