4QFY23 to be strong quarter for Indian FMCG companies

New Delhi, April 12 (SocialNews.XYZ) The commentary from companies indicates that inflation continues to weigh on demand and that there has been no meaningful improvement in the underlying consumption trends, BNP Paribas India said in a report.

Our channel checks also confirm this trend. Rural growth has remained sluggish while urban consumption has also softened.

We expect most companies in our staples coverage to report double-digit EBITDA growth helped by sales growth and margin improvement.

While general consumption trends remained muted, we expect 4QFY23 to be a strong quarter for Indian FMCG companies, as the benefits of past price hikes should drive double-digit revenue growth, while the cool-off in raw material prices and lower than usual advertisement spends should help margins, BNP Paribas India said.

"We believe some of these trends may not sustain as the benefit of price hikes is likely to fade, part of the raw material cost benefits will get passed onto consumers and advertising spends will return to normal levels. Recall that our estimates for FY24 have been below consensus, which we further lower with this report. We retain our negative view on the sector," the report said.

The domestic market demand trends in 4QFY23 have largely been similar to those of the past few quarters, given the high inflation. While we expect muted volumes for the staples companies for the quarter, we expect volumes to gradually improve on the basis of reversal of grammage cuts and anniversarisation of price hikes coupled with price cuts.

The demand from the rural market continues to remain under pressure. While there have been some green shoots, there has been no material evidence showing sustainable demand improvement. In addition, abrupt rain and El Nino concerns can put further pressure on agri-income, BNP Paribas India said.

Source: IANS