fmcg stocks: winter extension to hurt Q4FY24 outlook for consumer packs; Nuvama suggests 6 stocks to buy.
Among the stocks presented above, Dabur India was the biggest performer and underperformed not only the Nifty FMCG index but also the broader Nifty index. Tata Consumer is rated as one of the best performing companies. The rise in the Nifty FMCG index was 19 per cent in one year and the latter was 30 per cent during this period.
Nuvama sees demand trends in the fourth quarter similar to the third quarter of 2024, with the rural recession continuing and urban markets driving growth driven by traction towards premium products. While winter damage categories such as household pesticides have expanded, winter care products have not seen much of a benefit, the brokerage said.
While a longer winter could have a negative impact on demand in the first quarter of 2025, the upcoming election could see a temporary surge in demand for small pack snacks and biscuits. In UP, Rajasthan, Bihar, West Bengal and Tamil Nadu, sales of small snacks and biscuits may increase by 6-8% during election period (Q1 25).
Nuvama expects the company to see slowing growth in the fourth quarter of 2024, despite improving margins.
Estimated 4th quarter 2024
In the fourth quarter of fiscal year 2024, rural population growth is likely to remain sluggish compared to the same period last year, similar to the third quarter, and is likely to improve slightly on a two-year basis.
Urban areas will still lead growth, but premium products are expected to outperform mass-market products. For companies like Hindustan Unilever (HUL), Britannia Industries, Marico, Pidilite and other paint companies, negative price growth is likely to continue in FY24.
Nuvama believes FMCG companies are likely to increase prices by 2-3% in FY 2025. Gross margins are still increasing year-over-year, but a significant portion of that is expected to be invested in advertising spend.
United Breweries could see volume growth of 9-10% in the fourth quarter of fiscal 2024 through innovation, share gains and proactive actions, a Nuvama report said.
Nuvama quoted NielsenIQ as saying FMCG industry value growth in CY24 is seen in the range of 4.5-6.5% compared to robust growth of 9.3% in 2023, driven by higher inflation.
(Disclaimer: Recommendations, suggestions, views and opinions provided by experts are their own. They do not represent the views of The Economic Times.)
