FMCG Stocks Outlook for the week – 17 to 21.07.2017
FMCG Stocks Outlook for the week – 17 to 21.07.2017
Stocks of most fast moving consumer goods companies are expected to consolidate next week,
except Hindustan Unilever Ltd, which is likely to rise in near term. The confusion over prices since
the rollout of goods and services tax from Jul 1 is also expected to clear up in the near term. Broader
market indices could therefore gain some momentum.
The implementation of GST has prompted most fast moving consumer goods companies to cut
prices of their products as the prices of inputs have come down. Wholesale channels and trade
partners of FMCG companies are, however, struggling with the next indirect tax and are downstocking.
Most of the wholesale trade partners are yet to implement GST entirely. There is still some
confusion. They are also de-stocking. Channel de-stocking has also impacted performance of these
companies in June and is expected to hit revenue and earnings before interest, taxes, depreciation
and amortisation growth during Apr-Jun period. Most companies expect GST-led issues to
smoothen out by August-end and recovery to begin from September. On demand side, most
companies have indicated that consumer off-take remains stable and in some cases is witnessing
acceleration.
Stocks of most FMCG companies also have very high valuation as the price cuts have not yet been
fully implemented in the market. A good monsoon this year will help increase rural demand for
most of these companies and the sales numbers could improve after October.
For staples universe, we expect aggregate revenues to grow marginally by 0.6% Y-o-Y (Year-onYear)
largely driven by price hikes as we expect volumes to decline across most
companies/categories barring Hindustan Unilever. Stock of HUL are likely to trade positively in the
short term. The company is likely to cope well with the uncertainty of sales numbers, owning to the
vast number of products it supplies.
Stock of ITC Ltd are likely to remain volatile in short term as the new prices of cigarettes are yet to
be announced. If the price of cigarettes increases, the market reaction will have to be watched. In
long term, the stock is positive as the company is expected to launch a series of products from
October. Revenue growth for ITC from its cigarette business is seen growing 5% on
year driven by 1% volume growth and the rest by price hikes.
Source : Cogencis Information Services Ltd.
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FMCG Stocks Outlook for the week – 17 to 21.07.2017
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Source : Cogencis Information Services Ltd.
