The fast-moving consumer goods (FMCG) industry posted lackluster numbers in the December quarter amid macroeconomic headwinds in the West and also a slowdown in urban demand. However, with domestic revival at play and consumption growth, Centrum Institutional Research stated, the sector is likely to see a boost in the coming months. Per the report by the brokerage firm, the sector is expected to witness a boost, especially from a recovery in rural demand. Rural inflation, meanwhile, is also witnessing a downward trend along with a gradual rise in real wages in rural areas.
In Q3, the FMCG sector grew by 10.6 per cent YoY in value terms from 5.7 per cent YoY in the previous quarter and the volume growth surged to 7.1 per cent on-year. During the third quarter of the fiscal year, an analysis report by Anand Rathi said, rural growth outpaced urban, by 2x, with rural volumes rising 9.9 per cent vs 5 per cent in urban markets. Most companies are seeing stronger traction in rural regions, while urban demand in Q3 remained muted. According to Nielsen data, however, there has been signs of urban demand reviving as well.
ALSO READFitch downgrade for Adani’s energy arm
Elara Capital said that in the past two quarters, FMCG sales have been subdued even as rural demand has witnessed a gradual recovery. “Delayed growth recovery, the slowdown in urban demand and higher prices of a few commodities have pushed FMCG stocks 10-35 per cent in the last 5-6 months. Thus, valuations of many of these companies have turned attractive at sub-40x FY27e EPS,” the brokerage firm said.
Sector management commentaries projected a brighter outlook, with high revenue, led by rural demand recovery, expanding distribution and pricing growth for most consumer companies.
Snapshots from Q3 earnings reports
In Q3, FMCG major ITC had posted a profit decline of 7.51 per cent YoY to Rs 4,935 crore. The company had, however, pointed to early signs of recovery in urban markets even as rural markets continued to witness a growth momentum. “With improving agri terms-of-trade, healthy kharif output, and improvement in rabi sowing, rural consumption is expected to build on the gradual recovery momentum witnessed in recent months; there are incipient signs of recovery in urban demand as well,” it had said.
» Read More
