Holiday season, which starts in August and lasts through December, puts the stocks of numerous companies in focus because their goods and services become extremely popular which leads to increased demand and higher revenues. Numerous holidays, which includes Christmas and Diwali, will be celebrated in next few months. Therefore, in such a scenario, the demand for consumer goods tends to be high during these festivals. As of now, several people have reignited the spark of excitement because of these festivals. Apart from this, the wedding season will immediately be seen after the festive season, which should increase demand even more and should extend shopping season. While some people will go out and shop for themselves or for their families, traders and investors will focus on the stocks to buy before Diwali so that they benefit from the momentum.
There are investors who wait for this season as the focus is only on consumer stocks and it makes the selection of stocks much easier. While traders will focus on short-term gains, the investors tend to focus on seasonal long-term stocks to buy before Diwali so that compounding benefit can be captured.
With this in mind, we will now focus on best stocks to buy before Diwali.
1. VIP Industries Ltd.
Established in 1968, VIP Industries Limited has been categorised as world’s leading manufacturers and retailers of luggage, backpacks and handbags. It is an established market leader in the organised luggage market in India.
The company has delivered a strong performance, as it saw growth across brands and channels. Furthermore, it has made significant progress in executing its transformation plan. Revenue from operations of the company for FY23 grew to INR2,082 crores, exhibiting a significant rise of ~61% in comparison to previous year’s INR1,290 crores. Strong growth was seen in both premium/mass premium and value categories. Modern trade channel exhibited resilience, which compensated for store closures and enabling growth through several other retail chains, exceeding pre-pandemic revenues.
Given the growing prominence of low-margin value segment and issues in mitigating increased raw material inflation with the help of price adjustments, the company maintained gross margins of more than 50% threshold. This accomplishment resulted from efficient cost management with the help of its ongoing ‘SCOUTs’ (Structural Cost-Out) programme. This programme is targeted at establishing long-term competencies. The company’s EBITDA and EBITDA margin for FY23 came in at INR331 crores and 15.8%, respectively in comparison to INR181 crores and 13.6% in the previous year.
Moreover, structural demand enablers for luggage are strong. Firstly, category continues to have significant room for expansion because this market is relatively untapped. Secondly, surge in travel, which includes leisure trips and essential journeys, offers favourable environment for higher demand. Given these favourable industry dynamics, VIP Industries Ltd. is expected to see improvement in revenues and profits.
2. Manyavar-Vedant Fashions Ltd.
Vedant Fashions Limited is a parent company to Manyavar, Mohey and Mebaz. Manyavar has been categorised as a leader in branded Indian wedding and celebration wear market which has a pan-India presence.
In 2023, the company’s strong portfolio and product diversity increased revenues by ~30.2% to INR13,549 million and EBITDA went up by ~30.1% to INR 6,783 million. Its strategy led to exceptional profitability with PAT of INR4,291 million and industry-leading PAT margin of ~31.7%.
Vedant Fashions exhibited consistent growth with gross profit coming at INR9,126 million, exhibiting a rise of ~31.2%, and PBT of INR 5,758 million, up by ~36.1%. Industry-leading gross margin of 67.4% and strong ROCE of 95.3% exhibit the company’s ability to generate significant cash, strengthening its position as financial leader in the industry.
The company is asset-light in terms of plant, property and equipment, enabling it to achieve high return on capital employed, mainly because of nature of its sourcing and manufacturing operations, with substantial majority of sales coming from its franchisee-owned EBOs. Large and growing Indian wedding and celebration wear market is being supported by higher customer spending which should support the company’s long-term growth targets.
3. Whirlpool of India Ltd.
Whirlpool of India Ltd, which is a subsidiary of Whirlpool Corporation, focuses on being best global kitchen and laundry company. The company has been categorised as largest manufacturers and marketers of major home appliances in India.
Whirlpool of India Limited announced its operating results for 1Q24, with consolidated total revenue from operations coming at INR2,038.6 crores, exhibiting a decline of ~2% on year-over-year basis. Consolidated EBITDA of the company in 1Q24 came in at INR123.4 crores, exhibiting a decline of ~6.4% against 1Q23. Consolidated PAT was INR76.7 crores, lower by ~9.3% year-over-year. Elica India saw double-digit revenue growth and strong growth in profits.
On the standalone basis, the company’s 1Q24 total revenue from operations came in at INR 1,922.9 crores, exhibiting a decline of ~3.1% year-over-year. Revenue in April and May was impacted by muted industry growth in refrigerators & air conditioners as a result of inclement weather. However, its revenue grew well in June 2023.
Despite relatively weak summer season as a result of unseasonal weather patterns, the company delivered +3% consolidated volume growth 1Q24. The company anticipates sales momentum to continue as it is quite optimistic about new products which were launched earlier and because of stronger ROI-focused execution.
Focus of the company will be on improving profitability in medium term with the help of portfolio premiumisation and cost reduction programs which are already in place. Elica India continues to deliver strong growth in sales and profits.
Conclusion
Since India’s festival season is underway, above are some of the best stocks to buy before Diwali. However, investors are required to do their own due diligence and research before taking any positions in the above-mentioned stocks. As and when the holiday season intensifies, investors can consider to add these stocks to their portfolio.
While these are some of the seasonal stocks to buy before Diwali, it is not advised to the investors to only use the seasonal investing strategies. Even though seasonality can be considered as a helpful analytical tool, it can prove its mettle when considered with technical and fundamental analysis.
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