Preview: India's consumer goods makers to see more delays in recovery

Colgate-Palmolive (India)

22/04/2024 11:02

By Ashna Teresa Britto and Praveen Paramasivam
       BENGALURU/CHENNAI, April 22 (Reuters) - 
    Most Indian consumer goods makers are unlikely to see a
recovery in volumes in the fourth quarter, analysts said on
Monday, indicating that any improvement can only be expected by
the December-quarter.
  
    Firms such as Godrej Consumer Products, which owns the
Cinthol soap brand, and toothpaste-to-honey maker Dabur India
have already flagged subdued demand for January-March,
prolonging a rural-led slowdown that started two years ago.
        "Consumer companies may be stuck in a limbo," said
Preeyam Tolia, a senior research analyst at Axis Securities,
adding that volume growth could pick up pace after the onset of
the monsoon, which typically boosts rural consumer confidence.
  
        Analysts expect volume growth in the low- to mid-single
digit percentage range for the fourth quarter, roughly the same
as the last six quarters.
  
        While consumer goods firms all through last year
maintained that a rebound in rural demand was on the horizon,
recovery has remained elusive due to persistently high inflation
and erratic weather.
  
        Unseasonal rains affected the sale of beverages during
the quarter, analysts said, while a delayed winter hit demand
for season-specific goods including mosquito repellents and
skincare products.
  
    
         Company             RIC        Average growth in        Revenue       Revenue
                                     previous three quarters     growth         growth
                                            per LSEG          estimate for   estimate for
                                                              March quarter   FY2025 per
                                                                per LSEG         LSEG
   Hindustan Unilever      HLL.NS              3%                 -0.6%          7.9%
           ITC             ITC.NS             2.2%                 -6%           9.7%
      Nestle India         NEST.NS            11.1%               6.9%           6.1%
  Britannia Industries     BRIT.NS            3.7%                1.9%           8.2%
       Dabur India         DABU.NS            8.4%                1.5%          10.2%
               Marico      MRCO.NS             -2%                2.1%           10%
                                                                             
     Godrej Consumer       GOCP.NS            -8.3%               4.9%           10%
        Products                                                             
                           COLG.NS            8.4%                9.7%           8.1%
 Colgate-Palmolive India                                                     
                                                                             
 Tata Consumer Products    TACN.NS             11%                10.3%         15.3%
 
        Further, large listed consumer goods firms are also
facing increasing competition, with smaller manufacturers now
better equipped to compete for shelf space due to declining
commodity prices.
  
        Lower raw material prices, including wheat and sugar,
could, however, aid in margin expansion across the board,
analysts said. But, this may not entirely reflect in the
bottomline due to price cuts and advertisement slots that have
become pricier due to the Indian Premier League cricket
tournament and national elections, they added.
    
    They tip gross margins for heavyweights such as ITC and
Britannia Industries to shrink or only expand moderately.
    Still, analysts expect pockets of strength in the March
quarter, with price increases driving growth at
Colgate-Palmolive India and new product launches benefiting Tata
Consumer Products, which kicks off consumer earnings on Tuesday.
    Hindustan Unilever and Nestle India also report later this
week, while other consumer goods firms are set to report their
earnings until May 23.

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FMCG sector's muted stock performance    https://reut.rs/4aGqn6r
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 (Reporting by Ashna Teresa Britto in Bengaluru and Praveen
Paramasivam in Chennai; Editing by Sonia Cheema)
 ((AshnaTeresa.Britto@thomsonreuters.com;))