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Top 5 stocks in Indias cosmetics and healthcare industry

08 Feb 2024

Indian households typically allocate a lower budget for beauty and personal care products than many other countries. However, in 2022, India ranked fourth globally in generating substantial revenue from the beauty and healthcare market. 

Industry estimates suggest India has over 3,500 beauty and personal care companies. Projections anticipate this market to expand with a CAGR of nearly 12%. Factors contributing to this surge include the emergence of modern beauty brands, heightened brand consciousness among consumers, and the rapid growth of online shopping platforms. 

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Investing in cosmetics stocks, which encompass companies involved in producing beauty products like makeup, lotions, shampoos, perfumes, hair colours, and accessories, presents an appealing opportunity. 

In this blog, let us explore some of India's best healthcare and cosmetic stocks, shedding light on promising investment opportunities.

Hindustan Unilever Ltd 

Hindustan Unilever operates in the FMCG (Fast-Moving Consumer Goods )sector, with its core business divided into three segments: home care, beauty & personal care, and foods & refreshments. 

The beauty & personal care segment contributes to 42% of revenue. HUL maintains a diverse product portfolio comprising over 900 SKUs in this segment. These products are designed to meet the needs of 14 distinct consumer clusters identified in India. This segment yields approximately 29% profit margins, the highest among all its divisions.

Some of the most prominent brands within their palette include Dove, Lifebuoy, Pepsodent and many more. 

HUL maintains a nearly debt-free status. The company has consistently demonstrated an ROE of 21.6%. Investors can find reassurance in the company's commitment to providing healthy returns, as evidenced by its consistent and robust dividend payout of 99.9%.

Dabur India Ltd

Dabur India Limited is the fourth largest FMCG company in India. It claims the title of the world's largest ayurvedic and natural healthcare company and has an extensive portfolio featuring more than 250 herbal/ayurvedic products.

Home & personal care contributes to 47% of revenues. In personal care, the company covers hair care, oral care, skin care, home care, and hygiene products.

Dabur has brands such as Odonil , Sanifresh and Odomos. Dabur India has consistently maintained a healthy dividend payout, with a payout ratio of 52.1%. 

Procter & Gamble Hygiene and Health Care Ltd

Procter & Gamble Hygiene and Health Care Ltd specialises in producing and selling branded packaged fast-moving consumer goods within the female care and healthcare sectors. Their diverse portfolio encompasses renowned brands like Whisper, India's leading feminine hygiene brand, and Vicks, the country's top healthcare brand.

The company conducts its manufacturing operations at two key locations in Himachal Pradesh, Goa and Baddi, ensuring efficient production and distribution of its products.

One aspect of the company's financial health is its significant debt reduction, resulting in an almost debt-free status. This prudent financial management has contributed to a strong 3-year ROE of 76.2%.

They have delivered value to its investors through a healthy dividend payout, maintaining an impressive dividend payout ratio of 112%. 

FSN E-commerce Ventures Ltd

FSN E-commerce Ventures also known as "Nykaa," operates as a digitally native consumer technology platform, offering consumers a content-driven, lifestyle-focused retail experience. The company has a diverse product portfolio encompassing beauty, personal care, and fashion items, which includes products manufactured under its brand.

Nykaa has positioned itself as India's largest speciality platform for beauty and personal care products, based on the value of products sold during FY21. Nykaa further distinguishes itself by boasting the highest AOV (Average Order Value) among prominent online beauty and personal care platforms in the country.

Over the past five years, the company has demonstrated profit growth, achieving a CAGR of 21.2%. 

Kaya Ltd.

Kaya Ltd. stands as a trendsetter in specialised skincare and hair care. The company's distinctiveness lies in its ability to offer tailor-made cosmetic services facilitated by a proficient team of dermatologists. These treatments are US-FDA-approved cosmetic dermatological procedures. 

Kaya has a vast geographical footprint, which ensures its presence is felt through an omnichannel approach. With a network of 95 clinics spanning 23 cities in India and an additional 23 clinics in the Middle East, the company's services are overseen by a dedicated team of over 220 dermatologists. 

Kaya Ltd. has diversified its operations into E-commerce, expanding its reach and accessibility to a broader customer base.

Wrapping Up

In India, most cosmetics stocks are affiliated with companies offering personal care products and fast-moving consumer goods. These firms are commonly categorised as defensive stocks, known for their relative stability even amidst broader economic volatility

Their products, such as hair oils or skincare items, tend to maintain steady demand even during economic downturns, unlike sectors like automobiles or consumer appliances.

Personal care and cosmetics stocks have a history of consistent dividend payouts. This aspect makes them particularly attractive to investors seeking a regular income stream while keeping their risk exposure in check. 

By considering stocks from well-established companies like HUL, P&G Hygiene and Health Care, Dabur India, Nykaa, and Kaya, investors can tap into this thriving market and potentially enjoy long-term rewards.

 

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