Equity Analysis /
Sri Lanka

Sri Lanka: Consumer SL - "Steady as she goes"; a sturdy rebound in 2021

  • Consumer sector to see steady recovery

  • Consumer demand and spending are slated to increase on low interest rate and consumption taxes

  • Counters exposed to food retailing and FMCG at the forefront of sector growth

Asia Securities
31 March 2021
Published byAsia Securities

We expect the consumer sector to see a steady recovery, supported by a gradual rebound in economic activity and income levels.

The sector looks to provide more sustainable long term growth, rather than growth fueled by government concession to consumers.

From a macro perspective, consumer demand and spending are slated to increase on the back of historically low interest rates and low consumption taxes.

A domestic focused economic growth agenda would support higher labor demand, particularly in the Agri and Manufacturing sectors.

As a result, higher economic activity stemming from local cultivation and domestic manufacturing will trigger stronger rural income.

Counters exposed to food retailing and FMCG food will remain at the forefront of sector growth, followed by demand for home personal care and non essential foods.

Durables and electronics have already seen a sharp recovery post lockdown, with the sub sector ripe for a replacement cycle.

Companies that invested in expanding capacity over the past 3 4 years, maintained.

continuous product development, and store expansion will benefit from the demand recovery.

Further, with a domestic focused growth agenda, counters exposed to local production, limited raw material and finished product imports, and catering towards the mid range prices will continue to see more consumer preference.