PETALING JAYA: The consumer sector is increasingly well-positioned to benefit from resilient domestic consumption, ongoing downtrading trends, manageable inflationary pressures and potential election-related positioning over the coming quarters, says Kenanga Research.
As consumers continue to hunt for value amid rising living costs, retailers are also strengthening their value propositions through targeted pricing and promotional strategies, the research house said in its updated sector report yesterday.
MR DIY Group (M) Bhd
launched its “Harga Tetap Sama” campaign, while value-orientated grocery retailers such as 99 Speed Mart Retail Holdings Bhd are also well-positioned to capture spending from increasingly price-conscious consumers.
Kenanga Research noted that the Middle East cost pressures appear manageable, with pricing responses varying.
“We observe that the ability to pass through costs varies, possibly depending on demand elasticity,” it added.
Companies such as MR DIY and Padini Holdings Bhd have opted to maintain stable pricing to preserve affordability, while Nestle (M) Bhd indicated that any price adjustments could be deferred until at least the fourth quarter of financial year 2026.
Meanwhile, Fraser and Neave Holdings Bhd and Farm Fresh Bhd have implemented selective price hikes or reduced promotional intensity, particularly to offset higher packaging costs.
Beyond resilient fundamentals, Kenanga Research believes the consumer sector could increasingly benefit from election-related positioning and sector rotational play over the coming quarters.
Historically, consumer stocks experienced valuation expansion ahead of general elections, driven by expectations of increased operating expenditure, cash assistance measures and stronger domestic consumption sentiment.
Over the past four election cycles, the Bursa Malaysia Consumer Product Index recorded forward price earnings ratio (PER) expansion in three instances, with average forward PER increasing by about 0.6 times during the six months preceding elections.
“With Budget 2027 set to be tabled in October 2026, it will potentially be the last federal budget before the next general election (which must be held by February 2028),” the research house noted.
It also believes that consumer sector valuations could see additional upside as investors increasingly position for domestic consumption-related themes.
Kenanga Research has upgraded the consumer sector to an “overweight” stance from “neutral” previously.
Accordingly, the brokerage continues to favour high-quality, defensive and value- orientated names such as MR DIY at a target price of RM1.95 and QL Resources Bhd at RM4.05 as its top picks.
It also upgraded Nestle to an “outperform” from “market perform” at a target price of RM106, following the recent share price correction.
Meanwhile, an analyst with a local brokerage said as near-term spending remains selective amid elevated living costs, demand for essential and value-for-money products continues to hold up, favouring defensive consumer names and value- oriented retailers with strong market positioning, operational scale and the ability to maintain affordable pricing.
“We also believe consumer sector valuations could see further support from pre-election expectations of further expansion of cash aids and domestic consumption stimulus measures,” the analyst noted.
This is alongside a potential sector rotational play into the consumer sector, particularly given attractive valuations across selected names.
