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HDFC Securities Institutional Equities
Our fast moving consumer goods coverage universe is expected to deliver 6/10% growth YoY/four-year compound annual growth rate in revenue in Q2 FY24 (versus 18/10% in Q2 FY23 and 9/3% in Q1 FY24).
The demand trend has remained stable during the quarter, mirroring the trends in Q1 FY24. Rural recovery remained below expectations due to high food prices and below-normal rainfall. The fmcg sector is expected to witness a gradual recovery in demand, led by-
moderating inflation;
a hike in minimum support price;
easing liquidity pressures;
government spending; and
healthy sowing.
Weak discretionary demand and delayed festive season (extended Shravan) are expected to particularly impact the summer portfolio of skin care, hair care, and other personal care categories.
Packaged food volume recovery will be crucial; price hike benefits will be low. Cigarette is sustaining a similar CAGR; reported numbers will largely be similar to underlying.
With companies passing on the benefits of lower commodity inflation to consumers through price cuts, there is likely to be a divergence between primary and secondary sales on account of channel destocking.
Most international geographies continued the positive growth momentum. Nestle India Ltd. and Radico Khaitan Ltd. are expected to deliver double-digit YoY growth.
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