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Consumer sector gets support from cheap commodity, keep an eye on these stocks before the results

Consumer Sector: Talking about the consumer sector, most sales and EBITDA growth are expected to be weak in the second quarter. Even after unlocking, consumer sentiments are still weak. Business activity is coming on track right now. Recovery in urban areas is still sluggish. However, with the improvement in the rural sentiment, there is a better recovery. However, what has benefited the consumer companies the most in this environment is the decline in commodity prices, including crude, or the continued softening. This has reduced the cost of companies. At the same time, companies have also tried to balance the impact of COVID 19 by reducing their expenses.

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Rural recovery fast

According to brokerage house Motilal Oswal, COVID 19 has an impact on consumer companies, but on the other hand, the rural recovery has intensified. Reduced fear of coronavirus in rural areas compared to urban areas, better monsoon and increased government spending on rural areas are the main reasons behind this. On the other hand, commodity prices have steadily decreased or remained soft. It also includes crude. Another thing goes in favour of consumer companies that they have limited their expenses in the past. This also includes advertising expenses and brand investment.

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Double-digit growth in many categories

According to brokerage house MK Global, there will be a good recovery in the second quarter compared to the first quarter. The business has not yet come fully on track in unlock, but the demand is increasing rapidly. Washing machines and refrigerator sales have been good in August and September. Festive sales have also seen a boom around Onam. There was double-digit growth in fans, wire and small appliances. Rural demand is steadily increasing. At the same time, the biggest advantage is the persistence of commodity prices.

commodity prices

The crude price remains around $ 40. The sugar index has grown on a quarterly and yearly basis. Mentha and copra prices fall. Barley prices have also decreased. Although palm oil has gained momentum. There is also a weakness in the No Agri Commodity.

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Top pics: Motilal Oswal

Hindustan Unilever: HUL has some gross margin pressure due to increase in palm fatty acid and packaging prices, but this pressure has been reduced by the company raising the prices of soap. Recently, the company has taken measures to reduce the expenditure in any way, it will get further benefits.

Dabur: Dabur is one of the companies that will get the most benefit from softening crude prices. The company’s fundamentals are also strong.

Marico: The price of copra was initially increased, but later it remained soft. The prices of other commodities used in the company are also soft. In this situation, overall margin growth is looking better.

Apart from this, Zee companies will get the benefit of softening in commodity prices, among them Asian Paints, Pidilite, UBBL and GSKCH.

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Top pics: MK Global

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Source: www.financialexpress.com

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Shehnaz is a Corporate Communications Expert by profession and writer by Passion. She has experience of many years in the same. Her educational background in Mass communication has given her a broad base from which to approach many topics. She enjoys writing about Public relations, Corporate communications, travel, entrepreneurship, insurance, and finance among others.
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