FMCG Q2 Results Preview - Volume Growth Improving Off A Low Base: Nirmal Bang

Nirmal Bang Report

Early commentaries from some FMCG players like Marico, Dabur and Godrej Consumer Products and our interactions with the management of other consumer staple companies suggest that the overall demand environment is showing signs of improvement but not as much as was anticipated earlier.

Volume growth is elevated compared to previous quarters on account of stable inflation, good distribution of rainfall and uptick in rural consumption.

Q2 FY25 is likely to witness slight to modest YoY gross margin expansion for several FMCG companies due to lower raw material prices, but rising ad spends, moderate realization growth vs preceding quarters mean that cumulative Ebitda margin is likely to decrease by 70bps YoY, with absolute Ebitda growing slower than revenue growth.

While commodity outlook is largely benign as highlighted in our commodity cost note released recently, prices of raw materials such as Tea, Coffee and Palm oil remain elevated on a YoY basis.

We are expecting our FMCG coverage universe to clock mid single digit revenue growth of 5.5% YoY.

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