Future Outlook Of The Consumer Discretionary Industry And Tilaknagar Industries Ltd (NSE:TI)

Tilaknagar Industries Ltd (NSEI:TI), a INR₹2.69B small-cap, operates in the consumer staples sector, which has been a consistent performer over time due to its robust consumer demand throughout economic cycles. However, changing demographics and purchasing behaviours make it critical for beverage companies to understand and capitalize on key consumer insights that identify growing trends. Producers must look at ways to sustainably grow their profits, invest in innovation, adapt to new ways of marketing the unique selling point of their drink offerings. Consumer staple analysts are forecasting for the entire industry, a positive double-digit growth of 12.79% in the upcoming year , and a strong near-term growth of 28.57% over the next couple of years. This rate is larger than the growth rate of the Indian stock market as a whole. Should your portfolio be overweight in the beverage sector at the moment? In this article, I’ll take you through the sector growth expectations, as well as evaluate whether Tilaknagar Industries is lagging or leading its competitors in the industry. View our latest analysis for Tilaknagar Industries

What’s the catalyst for Tilaknagar Industries's sector growth?

Beverage companies are now shunning traditional sugary drinks and mass-marketing approaches in an attempt to restructure their brands to appeal to the more health-conscious consumer. Players in the industry are tracking these changes more closer than ever to gauge consumer preferences so they can remain ahead of these trends. In the past year, the industry delivered growth of over 50%, beating the Indian market growth of 12.84%. Tilaknagar Industries lags the pack with its sustained negative earnings over the past couple of years. The company's outlook seems uncertain, with a lack of analyst coverage, which doesn't boost our confidence in the stock. This lack of growth and transparency means Tilaknagar Industries may be trading cheaper than its peers.

Is Tilaknagar Industries and the sector relatively cheap?

The beverage sector's PE is currently hovering around 26x, in-line with the Indian stock market PE of 28x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 10.98% on equities compared to the market’s 9.82%. Since Tilaknagar Industries’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Tilaknagar Industries’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

Are you a shareholder? Tilaknagar Industries has been a beverage industry laggard in the past year. If your initial investment thesis is around the growth prospects of Tilaknagar Industries, there are other beverage companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Tilaknagar Industries fits into your wider portfolio and the opportunity cost of holding onto the stock.

Are you a potential investor? If Tilaknagar Industries has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its beverage peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at Tilaknagar Industries’s future cash flows in order to assess whether the stock is trading at a reasonable price.

For a deeper dive into Tilaknagar Industries's stock, take a look at the company's latest free analysis report to find out more on its financial health and other fundamentals. Interested in other consumer staples stocks instead? Use our free playform to see my list of over 100 other consumer staples companies trading on the market.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.