FMCG stocks may face both time and price correction: Mayuresh Joshi

economictimes.indiatimes.com:

Mayuresh Joshi, Head- Equity Research, William O Neil India, says FMCG companies will have to ramp up their ad spends if they need to push their products through and their SKUs across price points in different markets and in different geographies as well to probably ensure that volume/value growth happens at a reasonable pace. Having said that, valuations are not too cheap within the space for HUL and Nestle and therefore, the stocks might just go into both time and price wise correction.

What was your takeaway from Nestle, ITC and Unilever's performance?
Volume growth that was anticipated by the markets has definitely come a tad lower both for HUL and Nestle – 2% for HUL and 4-5% for Nestle.

But it was largely a combination of two factors. One, rural discretionary spending is expected to come back in a very moderate fashion.

A large part of the analysts believe in a very strong rural recovery in the second half which obviously gives a huge impetus to FMCG players both in terms of their volume and value growth. And if it is a moderate recovery, the expectation in terms of significant volume growth gets pushed back probably to the first half of the next financial year.

Having said that, FMCG companies will have to ramp up their ad spends if they need to push their products through and their SKUs across price points in different markets and in different geographies as well to probably ensure that volume/value growth happens at a reasonable pace. Having said that, valuations are not too cheap within the space for HUL and Nestle and therefore, the stocks might just go into both time and price wise correction.

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