L'Oreal(US:LRLCY)2024-10-24 10:13Investment Rating - The report maintains an Overweight rating on Unicharm and MAP Aktif Adiperkasa (MAPA) while downgrading Avenue Supermarts Limited (DMART) to Neutral [3][11][15]. Core Insights - The Asia retail space is experiencing rising capital interest, with notable M&A activities such as Sun Art's potential takeover and Central Group's partnership with Saudi Arabia's PIF [1]. - China's retail sales showed a year-on-year increase of 3.2% in September, driven by a home appliance stimulus policy, with home appliance sales up 20.5% year-on-year [2]. - The Indian retail sector is facing growth moderation, particularly for Reliance Retail and DMART, with DMART's like-for-like growth moderating to 5.5% in Q2 [2]. - Japan's real wage growth turned negative again, with a 0.6% year-on-year decline in August, impacting consumer sentiment [2]. - The ASEAN consumer market is experiencing a K-shaped recovery, with muted consumption trends but some growth driven by international tourism and government stimuli [3]. Summary by Sections China Consumer - Budweiser APAC's sales in China are expected to decline by 4% year-on-year in Q3 2024, although the decline is narrowing [6]. - The upcoming stimulus policy for boosting domestic consumption is seen as a major upside catalyst for the brewery sector [6]. Japan Consumer - The domestic pet care market in Japan is expected to grow significantly, with Unicharm maintaining an Overweight rating due to its established market presence [3]. - Welcia Holdings reported a 23% decline in operating profit, leading to a guidance cut for FY2024 [8]. - AEON's operating profit fell 23% in Q2, missing expectations, primarily due to insufficient measures to secure gross profit [8]. India Consumer - DMART's revenue growth moderated to 14% year-on-year in Q2, with significant impacts from online grocery competition [11]. - The Indian paints industry is navigating a soft demand environment, with companies like Asian Paints expecting EBITDA margins to decline [11][12]. - Titan Company reported a 26% year-on-year growth in jewellery revenue, driven by a reduction in custom duty on gold [12]. ASEAN Consumer - The ASEAN consumer market is characterized by muted consumption trends, with companies focusing on cost management and product mix to maintain margins [3]. - Preferred picks in the ASEAN market include CPALL, JFC, MRDIY, and MAPA, which are expected to benefit from rising sports spending [3][15].