FMCG Stocks Outlook for the week – 25 to 29.05.2015

FMCG Stocks Outlook for the week – 25 to 29.05.2015
 In range; ITC weak as Jan-Mar result below view

Stocks of fast-moving consumer goods companies are likely to trade range-bound next week with some volatility expected due to expiry of the futures and options contracts. Heavyweight stock ITC is seen weak as the company's Jan-Mar earnings missed analysts' estimate. ITC's net profit in Jan- Mar rose 3.6% on year to 23.61 bln rupees, while net sales were up just 0.5% at 91.88 bln rupees. ITC's net profit was seen at 25.27 bln rupees and net sales at 98.23 bln rupees during the quarter.

On ITC's Jan-Mar quarter performance. To-down miss to expectations with muted growth across all parameters. Cigarette volume decline estimated at 14-15% YoY. Agriculture segment was the major dampener to the revenue. There could be some shift in investors interest to Hindustan Unilever with overall trend in ITC expected to be weak. Market participants will keep a watch on Jyothy Laboratories’ Jan-Mar financial results, which will
be detailed on Monday. Most of the key FMCG companies have already declared their Jan-Mar earnings and hence there aren't any fresh triggers in the FMCG space. Now, the main thing that we have to keep an eye on is how the monsoon fares. We can see some movements in FMCG sector during that time. The southwest monsoon is crucial, as it affects rural demand patterns for consumer goods.

The other stocks that will be in focus are Nestle India and Dabur India. Market will keep an eye on Nestle, after reports of probe by various state Food and Drug Administrations on Maggi Noodles, regarding higher than permitted level of lead and monosodium glutamate in the product. The company has denied adding monosodium glutamate to the product and said the authorities' tests may have detected glutamate, which occurs naturally in many foods.

It also said that lead content in the product was within permissible limits. Dabur India, which has 60% share in the Indian packaged juice market, is set to hike prices of its flagship juice brand Real as well as launch a new sub-brand Real Wellness soon. The company will hike prices of most products under Real, which is now a 10-bln-rupee brand, by 6.1% in mid-June. Meanwhile, Godrej Consumer Products that has been on a downward journey this week, is likely to trade sideways next week.