PETALING JAYA: Defensive consumer stocks with mass-market appeal can help smooth over some of the volatility and challenges facing the market as businesses grapple with rising costs amid more cautious spending.
Analysts were split on their outlook for consumer stocks, with CIMB Research maintaining a “neutral” call as it expects softer financial performance for second quarter ending June 30, 2026 (2Q26) and 3Q26, as consumers turn cautious amid inflationary pressures and macro uncertainties.
RHB Research has maintained an “overweight” call on the stocks.
“In our view, consumers will prioritise daily essentials and value-for-money purchases, while discretionary spending could remain more subdued,” CIMB Research said, noting that festive-driven spending was largely front-loaded into 1Q26.
It pointed to 99 Speed Mart Retail Holdings Bhd
and MR DIY Group (M) Bhd’s 1Q26 sales mix that saw higher year-on-year (y-o-y) contribution from essentials, such as food-related and household staple items, as evidence of consumer caution.
“Similarly, Aeon Co (M) Bhd reported stronger sales of foodline items in 1Q26, at the expense of weaker sales in the health and beauty category, which we view as another indication of consumers cutting back on non-essential spending,” it said.
The brokerage views as fair consumer stocks trading at 26.9 times one-year forward price-earnings, given softer consumer sentiment, a more muted earnings outlook and rising cost pressures.
It added that valuations would be underpinned by large-capitalised staples supported by inelastic demand for essential goods, continued government support via cash handouts/Sumbangan Asas Rahmah (Sara), spillover from minimum wage increases, and withdrawals through the Employees Provident Fund’s Account 3.
“In this environment, we advocate positioning towards defensive, mass-market names that benefit from downtrading and resilient demand, with affordability remaining a key theme into 2026,” RHB Research said, with top picks, all with “buy” calls, being QL Resources Bhd with a target price (TP) of RM4.60, Empire Premium Food Bhd with a TP of RM1.36 and Life Water Bhd with a TP of RM1.77.
RHB Research also said consumer stocks should continue to provide a defensive shelter by offering earnings visibility amid market volatilities, thanks to a domestic-centric earnings base and resilient consumption.
It said the fundamentals would be underpinned by the rising prominence of the Sara programme in channelling more spending while the fuel subsidies would also be key to supporting consumption and containing inflationary pressures.
It added a prolonged Middle East conflict could lead to soft consumer spending and cost pressures, but these may not pale y-o-y as the overall environment in 2Q25 to 3Q25 was also challenging due to uncertainty over the US reciprocal tariffs, while a strong ringgit, stabilising commodity price trends and Visit Malaysia Year 2026 campaign could mitigate downside risks.
It has maintained “buy” calls on its top picks – Nestle (M) Bhd with a TP of RM130, Farm Fresh Bhd with a TP of RM2.69, MR DIY with a TP of RM2.20 and Eco-Shop Marketing Bhd with a TP of RM1.80.
On a more positive note, the research house said not many companies have encountered or foreseen major supply chain disruptions, thanks to their large scale operations, diversified supply chains and adequate inventory buffer.
However, the implications of a prolonged Middle East conflict have prompted most companies to seek measures to mitigate costs and stimulate consumer spending.
