FMCG Sector Q1FY24 Preview: Demand to gain traction; softer commodity costs to boost margins

livemint.com:

FMCG) companies improved in Q1FY24 led by urban markets and a recovery in the rural markets. Sector analysts expect sales growth to moderate to a single digit as the demand is shifting to a volume-led growth from being a pricing-led one.

Overall, net profit of consumer goods companies is expected to rise by around 19-20% on-year driven by softening input costs, while EBITDA growth is likely to be around 17-18% YoY. “The urban market continues to lead growth while rural is also showing signs of improvement in demand both sequentially and yearly, as companies have started to pass on the benefits of lower commodity costs to consumers," said brokerage firm Motilal Oswal Financial Services.

Also Read: FMCG companies eye improved margins as raw material costs ease It expects the 19 consumer companies under its coverage to report a cumulative growth of 8.9% in revenue, 17.8% in EBITDA, and 19.1% in PAT in Q1FY24. In terms of volume, FMCG companies are likely to post mid-to-higher single-digit growth during the quarter under review.

“With the high-cost inventories being consumed by most of the companies and the impact of price hikes being entirely absorbed, we expect gross margins to improve YoY. The benefits from margin improvement will be used by companies in advertisement and promotional spends to drive demand," the brokerage firm added.

Cumulative earnings growth is expected to be driven by large companies such as Britannia Industries, Godrej Consumer Products and Tata Consumer Products.  Also Read: Auto sector Q1 preview: Margin expansion to continue driven by operating leverage, softening commodity costs Here’s how individual companies in the FMCG sector is expected to perform in the June quarter of FY24. Britannia