FMCG Stocks Outlook for the the week - 07 to 11.11.2016
Stocks of most fast moving consumer goods companies are likely to fall next week in the absence of
strong volume growth until now for the Oct-Dec quarter. Market participants will also wait for
more clarity on Goods and Services Tax slabs and other details likely to emerge this month. Cess
rates need to be finalised before any comments can be made. One needs to watch out which
products are placed under what category. The prices of cigarettes are likely to increase once the
final decision on cess to be levied is made.
Thursday, the Government decided to place cigarettes in the slab that is charged highest tax at the
rate of 28% under the GST regime and levy an additional cess them. Though the GST rate and
additional cess is not expected to be more than the current tax and excise duty being paid by
cigarette companies, prices could rise in the near future. Subdued Jul-Sep results of FMCG
companies are also likely to weigh on the shares in the coming days. Among the major companies,
Hindustan Unilever, ITC Ltd, Dabur India Ltd, and Marico Ltd declared their earnings for the quarter
ended September this week.
While HUL's net profit was up nearly 12% on year at 10.96 bln rupees, the reporting quarter
volumes took a hit of 1% sequentially. Despite the low commodity prices, HUL's volumes fell in the
quarter, which shows turnaround is really not happening. Godrej Consumer is likely to detail its Jul- Sep results on Monday.
Companies in the FMCG sector for which the tax rate is likely to be the highest at 28%--including
those that manufacture liquid detergents, hair conditioners, body wash, premium chocolates and
processed foods--are also likely to remain under pressure. The outcome of the US elections, due on
Nov 8, is likely to impact broader markets and could have an indirect bearing on FMCG stocks as
well.
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strong volume growth until now for the Oct-Dec quarter. Market participants will also wait for
more clarity on Goods and Services Tax slabs and other details likely to emerge this month. Cess
rates need to be finalised before any comments can be made. One needs to watch out which
products are placed under what category. The prices of cigarettes are likely to increase once the
final decision on cess to be levied is made.
Thursday, the Government decided to place cigarettes in the slab that is charged highest tax at the
rate of 28% under the GST regime and levy an additional cess them. Though the GST rate and
additional cess is not expected to be more than the current tax and excise duty being paid by
cigarette companies, prices could rise in the near future. Subdued Jul-Sep results of FMCG
companies are also likely to weigh on the shares in the coming days. Among the major companies,
Hindustan Unilever, ITC Ltd, Dabur India Ltd, and Marico Ltd declared their earnings for the quarter
ended September this week.
While HUL's net profit was up nearly 12% on year at 10.96 bln rupees, the reporting quarter
volumes took a hit of 1% sequentially. Despite the low commodity prices, HUL's volumes fell in the
quarter, which shows turnaround is really not happening. Godrej Consumer is likely to detail its Jul- Sep results on Monday.
Companies in the FMCG sector for which the tax rate is likely to be the highest at 28%--including
those that manufacture liquid detergents, hair conditioners, body wash, premium chocolates and
processed foods--are also likely to remain under pressure. The outcome of the US elections, due on
Nov 8, is likely to impact broader markets and could have an indirect bearing on FMCG stocks as
well.
