3 December 2025 India Emerging Consumer India Consumer: Light at the end of tunnel? Not yet. Jignanshu Gor +91 226 842 1494 jignanshu.gor@bernsteinsg.com 2025 was supposed to be the year the Indian Consumer made a comeback. Has it happened? We look at 3 data points to evaluate prospects of the much talked about "festive revival in 3Q F26": (a) NPCI-UPI data released by Merchant Category Code (b) App usage data for e- commerce companies and (c) Management commentary during 2Q F26 conference calls. UPI transa ...

Group 1: Market Outlook - Global investors are returning to explore bottom-up stock opportunities after 4-5 years of being on the sidelines, indicating a shift in foreign investor behavior [2][18] - India's valuations remain elevated, particularly in the autos, consumption, and industrial sectors, but pressure is easing as global markets correct and corporate earnings stabilize [2][18] - The Nifty's latest quarter showed 8-10% PAT growth, but margins remain soft; markets are expected to break out of consolidation only if earnings shift toward higher double-digit growth [6][18] Group 2: Sector Analysis - UBS remains positive on the BFSI sector, recommending a stock-specific approach rather than a PSU versus private lens; both private and PSU banks are seen as strong, with growth differentiation being key [8][18] - In the consumption sector, segments like jewellery and quick commerce are attractive, while some FMCG and auto names appear stretched [10][18] - The power and energy profit pool expansion is underestimated, with private corporate capex steady as a share of GDP, although a repeat of the 2003-07 boom is not expected [11][18] Group 3: Emerging Trends - Quick commerce is viewed as a high-growth area, with improving unit economics and faster dark-store expansion even in smaller markets [13][18] - Traditional auto manufacturers with limited EV exposure may underperform, and caution is advised in this sector [14][18] - India is not yet part of the global AI boom due to a lack of large capex-heavy AI infrastructure players; focus should be on how IT services adapt and which sectors adopt AI fastest [15][18] Group 4: IPO Market - Global investors are cautious but not worried about the exuberance in India's IPO market, viewing it as a small slice of their exposure; participation in IPOs does not significantly impact core investment strategies [16][18] - Despite global uncertainties and high valuations, India's narrative remains strong and diversified, with a bottom-up market approach being more appealing than a concentrated top-down strategy [16][18]

Core Points - India's cabinet has approved a spending plan of 450.6 billion rupees ($5.1 billion) to support exporters, which includes 200 billion rupees in credit guarantees for bank loans [1] - The plan allocates 250.6 billion rupees over six years for affordable trade finance aimed at small exporters, logistics, and market support to mitigate the impact of recent U.S. tariff hikes [2] - Labour-intensive sectors such as textiles, jewellery, and seafood have been significantly affected, with margins as low as 3%-5%, leading to job losses in key industrial regions [3] Financial Support Details - The credit guarantee program will run until March 2026, providing collateral-free bank loans to exporters to enhance competitiveness and explore new markets [3] - Credit guarantees will be available for loans up to 500 million rupees [3] Export Market Impact - Nearly 55% of India's exports to the U.S., valued at approximately $48 billion, are at a cost disadvantage compared to competitors from Vietnam, China, and Bangladesh [4] - India's merchandise exports to the U.S. fell nearly 12% year-on-year to $5.43 billion in September, following the implementation of 50% tariffs [5]

Market Reaction to Tax Changes - Gold prices initially slipped by 1% in Asian trading but later recovered, with spot gold trading near $4,012 an ounce in London [2][4] - The recovery followed Beijing's announcement to limit VAT offsets for gold sourced from the Shanghai Gold Exchange (SGE) and the Shanghai Futures Exchange (SHFE) [2][4] - Under the new rules, producers of non-investment gold can now deduct only 6% of VAT instead of the previous 13% [2][4] Impact on Jewellery Stocks - The tax changes led to a significant decline in jewellery stocks, with Chow Tai Fook Jewellery Group Ltd. dropping as much as 12%, Chow Sang Sang Holdings International Ltd. falling over 8%, and Laopu Gold Co. losing more than 9% [3][4] - Analysts predict that the industry will likely raise prices to pass through the cost pressure resulting from the tax changes [3][4] Investor Sentiment and Market Trends - Despite the turbulence, investor appetite for gold remains strong, with prices still over 50% higher since the start of the year [3][4] - Gold reached an all-time high in October due to a surge in retail buying, and core factors such as central bank purchases and safe-haven inflows continue to support the market [3][4] - The recovery in London trading indicates that bullish sentiment towards gold is still firm, despite concerns about the impact of tax changes in China [3][4][5] Performance of Other Precious Metals - In the broader precious metals market, platinum increased by as much as 2.2%, while silver and palladium also recorded small gains [5]

Core Insights - The resurgence of sculptural and unusual jewellery is anticipated by trend forecasters for 2025, indicating a shift towards more artistic and unique pieces in the market [1][26] - Sculptural jewellery has historical roots dating back to the 1930s, with significant contributions from designers like Alexander Calder and Elsa Peretti, whose works have influenced contemporary trends [2][26] - The demand for unique, handmade jewellery is growing, particularly in India, as consumers seek one-of-a-kind pieces that reflect their individuality and confidence [2][7][12] Industry Trends - The trend of sculptural jewellery is gaining traction in India, with designers like Nitya Arora of Valliyan noting increased consumer interest in unique designs that were previously overlooked [2][26] - Artisanal and handmade jewellery is becoming a luxury standard, with consumers valuing the imperfections and uniqueness of handcrafted items over machine-made products [7][12] - The rise of social media and increased disposable income among Indian consumers are contributing to the visibility and popularity of sculptural jewellery [14][22] Consumer Behavior - There is a notable shift in consumer preferences, with many individuals moving away from traditional gold jewellery towards more artistic and expressive pieces [12][22] - Younger consumers, particularly Gen Z, are more experimental and confident in their jewellery choices, often seeking pieces that reflect their identity and personal style [22][28] - The market for non-traditional jewellery, including items like teeth grilles and men's jewellery, is seen as an underserved niche with significant growth potential [22][28] Designer Innovations - Designers are increasingly incorporating unconventional materials and forms into their jewellery, with examples including watch dials and metal couture [5][10][27] - The concept of jewellery as an extension of personal identity is being emphasized, with brands focusing on storytelling and the artistic process behind their creations [16][19][22] - Collaborative efforts between designers and consumers are leading to the creation of unique pieces that resonate with individual tastes and preferences [28]

Core Insights - Danish jewellery maker Pandora's president and CEO Alexander Lacik will retire in March 2026 after nearly seven years in the role, with Berta de Pablos-Barbier, the current chief marketing officer, set to succeed him [1][5] - Under Lacik's leadership, Pandora has seen significant growth, including a 45% increase in revenue and an expansion of the global workforce from 24,000 to 37,000 [4] Leadership Transition - Berta de Pablos-Barbier joined Pandora's executive leadership team in November 2024 and has a strong background in the luxury goods industry, having previously served as president and CEO of LVMH's champagne brands [2][3] - De Pablos-Barbier expressed her honor in taking over as CEO and highlighted Pandora's potential for sustained growth as an accessible jewellery company [3] Strategic Evolution - The company aims to continue its strategic evolution as a full jewellery brand, building on the strong results achieved during Lacik's tenure [2] - Lacik emphasized the successful establishment of Pandora as a leading global consumer brand and expressed confidence in de Pablos-Barbier's ability to lead the company forward [5]

Summary of Laopu Gold Conference Call Company Overview - **Company**: Laopu Gold - **Industry**: Retail Gold Jewelry - **Market Cap**: HK$149 billion (approximately US$19.0 billion) [7] Key Financial Highlights - **H1 2025 Expectations**: Anticipated net income (NI) of Rmb2.3-2.5 billion, representing a year-over-year growth of 280% to 330% [2] - **Forecasted Growth**: - Revenue: Rmb12.9 billion - Net Income: Rmb2.3 billion - Adjusted Net Income: Rmb2.4 billion [2] - **Full-Year NI Expectation**: Market expectations for full-year NI at approximately Rmb5.5 billion may be overly optimistic [2] Gross Profit Margin (GPM) Insights - **GPM Pressure**: GPM for pure gold products has been declining due to a 34% increase in gold prices from January to April, while Laopu only raised prices by 10% [3] - **Future Price Adjustments**: Anticipation of more aggressive price hikes in H2 to mitigate GPM pressures, including price increases on existing products and the introduction of premium products [3] Store Expansion Plans - **New Store Openings**: Laopu plans to open 9 high-quality boutiques in 2025, with 8 located in premium shopping malls in tier-1 cities, Hong Kong, and Singapore [4] - **Expected Productivity**: New stores are projected to achieve 2x-4x the average store productivity compared to previous years [4] Valuation and Price Target - **Rating**: Neutral - **Price Target**: Raised to HK$980 from HK$900, reflecting a 33x/25x PE ratio for 2025/26 estimates [5] - **Earnings Per Share (EPS) Growth**: 2025-27E EPS increased by 25-35% due to strong same-store sales growth and operating leverage [5] Financial Projections - **Revenue Growth**: - 2025E: Rmb27.44 billion (39.8% increase from previous estimates) - 2026E: Rmb36.11 billion (36.9% increase) - 2027E: Rmb43.54 billion (31.4% increase) [9] - **Net Income Projections**: - 2025E: Rmb4.71 billion - 2026E: Rmb6.24 billion - 2027E: Rmb7.59 billion [9] Risks and Challenges - **Industry Risks**: - Economic slowdown in China affecting consumer spending - Competition from lab-grown diamonds and other retailers [15] - **Company-Specific Risks**: - Competition from other jewelers - Potential consumer shift to imitation products [16] Upside Potential - **Positive Factors**: - Sustained high gold prices - Successful new product launches - Better-than-expected consumer acceptance of price increases [17] Conclusion Laopu Gold is positioned for significant growth in 2025, with strong sales momentum and strategic store openings. However, GPM pressures and market expectations for net income present potential risks that need to be monitored closely. The company's neutral rating reflects a balanced view of its growth prospects against the backdrop of industry challenges.