Whalesbook
Defense and Infrastructure Picks
Nomura's positive view on Hindustan Aeronautics Limited (HAL) is supported by a strong order book exceeding ₹2.54 lakh crore, offering clear visibility for projects like the Light Combat Aircraft. While provisional FY26 revenue missed estimates due to supply chain issues, Nomura updated earnings forecasts, expecting gradual supply improvements from vendors like General Electric. The stock trades at a P/E of about 36.7x, in line with its historical average, while peer Bharat Electronics trades higher at 52.35x.
Adani Ports and Special Economic Zone (APSEZ) earns a 'Buy' rating with a target price suggesting over 34% upside. This is driven by an 11% year-on-year cargo volume increase in FY26 and a diverse port and geographic spread that helps absorb geopolitical impacts. Nomura forecasts 17% compound annual EBITDA growth from FY26-FY28, driven by capacity expansion and efficiency gains. The stock's P/E ratio is about 25.84x, lower than its peer median of 45.26x, suggesting relative undervaluation. However, the ongoing Middle East conflict poses risks to trade routes, potentially impacting cargo flows despite APSEZ's diverse operations.
Consumer Goods: Demand Recovery Expected
In the consumer staples segment, Dabur India receives a 'Buy' call with an expected 44% upside. Although Q4 performance may be modest due to softer healthcare and beverage sales, Nomura sees signs of domestic demand recovery and strong brand loyalty as key long-term positives. The stock trades at a P/E of approximately 40.33x.
Other Nomura 'Buy' picks, Godrej Consumer Products (P/E 55.88x) and Marico (P/E 50.23x), suggest a positive sector view. Marico is rated 'Buy' with a target price implying 20% upside. Strong Q4 revenue growth is anticipated, supported by volume gains and improving demand trends, with falling copra prices expected to boost margins. Marico reported Q4 FY26 revenue up in the low twenties year-on-year, with expected double-digit operating profit growth.
Godrej Consumer Products (GCP) also holds a 'Buy' rating, with Nomura projecting a 49% upside. The brokerage expects near double-digit revenue growth in Q4, driven by strong Indian volumes and confidence in offsetting cost pressures through pricing and savings.
E-commerce: High Growth, High Valuation
FSN E-Commerce Ventures, the parent company of Nykaa, retains a 'Buy' rating with a 24% upside projection. Nomura highlights strong momentum in beauty, personal care, and fashion, with Q4 revenue growth expected in the high twenties, noting fashion as a key growth driver. However, FSN E-Commerce Ventures trades at a high P/E of about 505x, far above the industry average of 124x, suggesting high expectations.
Key Risks to Watch
The Middle East conflict remains a significant risk, disrupting shipping routes, raising freight and insurance costs, and potentially affecting supply chains for imports essential to sectors like ports and consumer goods. For HAL, delays in engine supplies from vendors like General Electric have impacted aircraft deliveries, though normalization is expected.
Several consumer companies, including Dabur, have faced near-term pressures from weak demand in specific categories. FSN E-Commerce Ventures' extremely high P/E of over 500x poses a major risk if growth targets are missed or market sentiment shifts. Despite Nomura's positive demand outlook, the broader FMCG sector has seen some softness, with Marico shares slipping nearly 2% recently despite a strong Q4 update. Competitors like Hindustan Unilever (Market Cap ₹5.34T) and ITC Limited (Market Cap ₹3.67T) operate at vastly different scales, potentially offering more stability.
Nomura's Upside Projections
Nomura's consistent 'Buy' ratings reflect confidence in the underlying strength of these diverse Indian companies. HAL's order book and Adani Ports' infrastructure position them for sustained growth. Consumer names like Dabur, Marico, and Godrej Consumer are expected to benefit from gradual domestic demand recovery and strategic brand management, while FSN E-Commerce Ventures is positioned to capitalize on the rapid expansion of India's digital commerce market. Nomura's price targets suggest significant upside, from 20% for Marico to over 62% for HAL, indicating confidence in their ability to overcome near-term challenges and deliver long-term value.