FMCG Q4 Results Review - Volume Growth Muted; Competition Intensifies: Axis Securities

Axis Securities Report

Topline growth remains muted: Most staple companies has delivered low to mid-single digit revenue growth as increased competitive intensity and anniversarization of price hikes has resulted in muted topline. On a positive front, most of the companies have highlighted early green shoots in the rural areas.

Hopeful on demand recovery: Easing inflation, higher government spending, and higher MSP are expected to drive rural demand in the coming quarters. However, the increasing competitive intensity from smaller and regional players, especially as raw material prices ease off, needs to be closely monitored.

Gross margin continues its recovery path; Ebitda margins in ‘Wait & Watch’: Gross margins across Staples companies are improving as key raw material prices such as crude, palm, and packaging materials remain stable. However, an increase in advertising spending to regain market share may slow down Ebitda margin expansion in the short term. However, this is expected to benefit in the longer run.

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