FMCG Q2 Earnings Review - Decent Operating Performance; H2 Commentary Remains Positive: Nirmal Bang

Nirmal Bang Report

Through this update, we take a review of the Q2 FY23 performance of our fast moving consumer good coverage universe. Value growth for the fmcg industry improved marginally to high single digits, driven by higher pricing.

Volumes continued to decline in both urban as well as rural markets with a more pronounced drop in the latter. Q2 FY23 topline of our fmcg universe grew by 17.3% YoY, 2.6% ahead of our estimate, largely led by:

1. higher pricing growth in Britannia Industries Ltd.’s standalone business,

2. ITC Ltd.’s fmcg business (cigarette and non cigarette) and

3. Nestle India Ltd.’s domestic business.

Consumer staples revenue (fmcg, excluding ITC and Gillette India Ltd.) grew by 13.5% YoY.

The three-year revenue compound annual growth rate for fmcg/consumer staples universe stood at 11.2%/11.1%. While volume growth for majority of coverage companies was in-line with our estimates, ITC’s (calculated) cigarette volume surprised us positively.

As expected, persistent inflation and consumption of high-cost inventory exerted pressure on Q2 FY23 margins.

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