7 smallcap, midcap consumption stocks to buy in rare phase of underperformance

Nifty FMCG and Consumption indices have fallen 17-20 per cent from their peak in September 2024, underperforming Nifty 100 by 900-600 basis points. This, MOFSL in its latest note, said is an aberration from historical trends, as consumption indices typically outperform the benchmark during phases of sharp market downturns. The domestic broking firm suggested seven stock ideas from the consumption sector that could be bought post the recent fall.

They included Page Industries, Devyani International Ltd, Metro Brands Ltd, V-Mart Retail Ltd, Lemon Tree Hotels Ltd, LT Foods Ltd, and Cello World Ltd.

"Nifty FMCG and Nifty Consumption indices have delivered an average alpha of 10 per cent/5 per cent, respectively, during the past 11 phases of a 10-plus correction in the Nifty over last two decades. Current underperformance can be explained by weak FY25 earnings," MOFSL said. 

Going ahead, MOFSL believes that the Rs 1 lakh crore of personal tax foregone in the FY26 Union Budget and multiple state-level income transfer schemes should drive higher disposable incomes—a substantial portion of which is likely to be channeled towards various consumption categories. 

"To stimulate demand and liquidity, the RBI, on its part, has utilized multiple monetary tools, such as 50bps CRR cut, 25bps repo cut, liquidity injection through OMOs and FX swaps etc. In addition, inflationary pressures appear to be easing, which should likely help in reversing some of the price-induced demand contraction," MOFSL said.

Page Industries
MOFSL said Page Industries has demonstrated consistent revenue and earnings growth over the past decade, with a 15 per cent CAGR in sales, Ebitda, and PAT as of FY24, alongside a robust RoE of over 40 per cent. The company’s growth has been driven by strong sales and efficient margin management. While there are gaps in its women’s innerwear and athleisure portfolios, these segments offer significant potential for expansion. 

"PAGE maintains a healthy dividend payout ratio and is expected to deliver strong earnings growth (~17% EPS CAGR from FY25E to FY27E). Given its solid financial track record, high RoE, and growth prospects, the stock is recommended as a BUY with a target of Rs 57,500, based on
a P/E multiple of 65x for Mar’27E EPS," it said.

Metro Brand
MOFSL values Metro Brands at 70 times March 2027 EPS to arrive at target price of Rs1,525 per share. It has not factored in any significant contributions from FILA and Foot Locker in our estimates till FY27, and a faster ramp-up could provide a further upside potential. It
reiterated 'Buy' rating on Metro Brands.

Devyani International
MOFSL said it recently upgraded its view on the QSR universe from cautious to positive following the tax relief announced in the Budget 2025 for middle-class income-tax payer.

"Additionally, QSR companies have already factored in the dismal operating performance. We reiterate our BUY rating on Devyani International with a target of Rs 215," it said.

LT Foods
MOFSL said 69 per cent of LT Foods' revenue derived from exports, LT Foods is well-positioned to benefit from rising global demand, particularly in key markets like the Middle East, Europe, and the US, it said.

"Additionally, margin improvements are expected from 2QFY26, as the company starts benefiting from low-priced inventory. We expect LT Foods to report a revenue/Ebitda/PAT CAGR of 14 per cent/19 per cent/25 per cent over FY25-27. At 17 times FY27 EPS, it arrived at a target of Rs 460, offering strong upside potential," it said.

Cello World
MOFSL said Cello World is a leading player with a strong brand reputation and extensive distribution network. It benefits from a growing TAM driven by favorable demographics, rising discretionary spending, and evolving gifting trends, MOFSL said. The brokerage estimated Cello to deliver a revenue, Ebitda and adjusted PAT CAGR of 14 per cent, 14 per cent and 15 per cent, respectively, over FY24-27. 
"Cello is currently trading at 23x FY27E P/E with a RoE/RoCE of 24%/26% in FY27E. We reiterate our BUY rating with a target of Rs 800," MOFSL said.

Lemon Tree
Lemon Tree is likely to maintain a healthy growth momentum, led by the ramp-up of Aurika Mumbai and the expansion of Aurika brand. MOFSL sees accelerated growth in the management contract and said the timely completion of the portfolio’s renovation leading to improved OR, ARR, and Ebitda margins. 
"We expect Lemon Tree to post a CAGR of 16 per cent/19 per cent/34 per cent in revenue/Ebitda/ PAT over FY24-27 and RoCE to improve to 19.3 per cent by FY27 from 10.2 per cent in FY24. We reiterate our BUY rating on the stock with our SoTP-based target of Rs 190," MOFSL said.

V-Mart
Given the rising presence of numerous value retailers in smaller towns, MOFSL believes there would be an impact on footfalls for the incumbent, pricing pressure leading to lower margins, and higher rental inflation, which could weigh on both growth as well as margins. 

"Over the longer term, we will watch out for rising competitive intensity in the value retail space," it said.

MOFSL said its covered consumer and retail stocks’ aggregate 12-month forward PE has corrected from the September 2024  peak of 54 times/109 times to 39 times/67 times. The market cap of these segments has declined by 21 per cent and 25 per cent from their peaks to Rs 26.6 lakh crore and Rs 9.9 lakh crore. 

"The divergence has been significant in Retail names, with corrections between -9% and -61%, while for Consumer, the range was between 0% to -36%," it said.