FMCG stocks rebound; ITC, HUL rally up to 5% from intra-day lows

Thus far in the calendar year 2024, the FMCG index was up 1.4 per cent, as against 13.5 per cent rally in BSE Sensex.

Shares of fast moving consumer goods (FMCG) companies were in focus, bouncing back up to 5 per cent from their intra-day’s lows on Friday on value buying. ITC moved higher to Rs 474.35, bouncing back 5 per cent from its intra-day low of Rs 451.60 on the BSE. While, Hindustan Unilever (HUL) hit an intra-day high of Rs 2,394.50, and has recovered 3 per cent from its intra-day low of Rs 2,333.40.

 

At 02:55 pm; the BSE FMCG index was up 1 per cent, as compared to 0.89 per cent rise in the BSE Sensex. The FMCG index was down 1.3 per cent in intra-day trade, and had bounced back 2.3 per cent from its day’s low.

 

In the past one month, the BSE FMCG index has underperformed the market by gaining less than 1 per cent. In comparison, the BSE Sensex has rallied 5.6 per cent during the same period. Thus far in the calendar year 2024, the FMCG index was up 1.4 per cent, as against 13.5 per cent rally in the benchmark index.

 

Godrej Consumer Products (GCPL) in its business update on December 6 said that it expects a flat underlying volume growth and mid-single-digit sales growth in the domestic market in the October-December quarter (Q3) of 2024-25 (FY25).

 

According to its filing, GCPL believes that due to an increase in soap prices, unseasonal rainfall, and a slowdown in sales of its home insecticide segment, flat underlying volume growth and mid-single-digit sales growth in the domestic market are expected in Q3.

 

Meanwhile, analysts at Antique Stock Broking believe that for October 2024 the demand sentiment remained weak as the festive season failed to drive recovery in offtake. With the delay in the winter season, offtake/ preloading of winter products have been below expectations.

 

The brokerage firm expects the winter portfolio to pickup in November. For HUL, detergent offtake remains strong while soap and personal care performance improved sequentially. The nutrition business continues with soft performance. ) For ITC, cigarette offtake growth should be ~3 per cent and food offtake should remain steady at mid-single digit.

 

HUL’s management anticipates an improvement in demand in the coming quarters, while EBITDA margins are expected to remain at current levels. However, HUL’s long-term growth prospects remain strong, according to analysts at Axis Securities.

 

On a cautionary note, the demand environment continues to remain challenging; with urban markets continuing to show weakness. Key raw materials (palm and tea) remain under inflationary pressure, and the company is likely to undertake low to mid single-digit price hikes in its soaps and tea portfolio in H2FY25. It expects moderate margin expansion over the mid to long-term, the brokerage firm said with maintain ‘buy’ rating on HUL.