Malaysia’s consumer sector is expected to remain a defensive investment haven amid growing global uncertainties, supported by resilient domestic spending, government assistance programmes and attractive valuations, according to RHB Research.
The research house maintained its Overweight call on the sector, naming Nestlé (Malaysia) Berhad, Farm Fresh Berhad, MR D.I.Y. Group (M) Berhad and Eco-Shop Marketing Berhad as its top picks.
RHB said it continues to favour companies with defensive characteristics and domestically driven earnings streams, particularly as external risks remain elevated.
The sector’s valuation has become increasingly attractive, with stocks under its coverage currently trading at around 23 times forward price-to-earnings, close to 1.5 standard deviations below their long-term average.
The research house highlighted Nestlé Malaysia and Farm Fresh for their strong pricing power and exposure to staple consumer products, while MR D.I.Y. and Eco-Shop are expected to benefit from consumers becoming more value-conscious and trading down to lower-cost alternatives should economic sentiment weaken.
Earnings Supported by Festive Spending
The first-quarter earnings season broadly met expectations, with nine of the 17 consumer stocks under RHB’s coverage delivering results in line with forecasts, seven falling short and one outperforming expectations.
Revenue and profit growth across the sector were largely driven by stronger consumer spending during the Lunar New Year and Hari Raya Aidilfitri festive periods.
During the quarter, RHB upgraded its recommendation on QL Resources Berhad, citing attractive valuations and expectations of a return to earnings growth.
Consumption Remains Resilient
According to RHB, year-on-year sales trends remained stable across most consumer companies, reflecting resilient household spending supported by healthy economic growth and a robust labour market.
The stronger sales performance also helped companies benefit from operating leverage, supporting profit margins despite ongoing cost pressures.
However, management teams across the sector have become more cautious compared with earlier in the year. Concerns are increasingly focused on the potential economic impact of escalating tensions in the Middle East, which could weigh on consumer sentiment and contribute to higher inflation through increased raw material, logistics and utility costs.
To mitigate these risks, many companies are exploring cost management initiatives while implementing promotional campaigns and other measures to sustain consumer demand.
Supply Chains Remain Stable
Despite concerns over geopolitical tensions, RHB noted that most consumer companies have not reported significant supply chain disruptions and do not currently expect major operational challenges.
The resilience stems from their large-scale operations, diversified sourcing strategies and adequate inventory buffers, which help cushion against potential disruptions.
Government Support and Tourism to Underpin Growth
Looking ahead, the research house believes the sector’s earnings visibility remains relatively strong compared with other industries due to its domestic-focused nature and the essential nature of many consumer products.
Additional support is expected from the government’s expanding Sumbangan Asas Rahmah (SARA) initiative, which is anticipated to channel more spending into the consumer economy.
Fuel subsidy support is also expected to help preserve household purchasing power and contain inflationary pressures.
Meanwhile, a stronger ringgit, stabilising commodity prices and the upcoming Visit Malaysia Year 2026 are expected to provide further tailwinds for the sector.
Risks Remain
Nevertheless, RHB cautioned that prolonged geopolitical conflicts, weaker consumer confidence, sharper-than-expected commodity cost inflation, supply chain disruptions and subsidy rationalisation measures remain key downside risks that could weigh on sector performance.
Despite these concerns, the research house believes Malaysia’s consumer sector remains well-positioned to weather market volatility and continue delivering relatively stable earnings growth in the months ahead.
