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Wednesday, January 19, 2022

FMCG Q3 Preview | Slowdown in rural demand may impact volume growth of companies

Four brokerage houses included in a poll conducted by Moneycontrol say that in the third quarter, the revenue growth of FMCG companies is likely to see an increase of 11.3 percent year-on-year, while their net profit may see a growth of 8.2 percent. . The slowdown in the rural market and increase in product prices may adversely affect the growth of FMCG companies.

Motilal Oswal In a note, FMCG companies have said in a note that the price hike will be the biggest contributor to the earnings of FMCG companies in the third quarter. Let us inform that these companies had increased the prices recently due to the increase in the prices of raw materials.

The rural areas contribute 40-50 percent of the demand for the FMCG sector. Due to rising inflation, the pockets of the consumer have been affected. Apart from this, due to abnormal monsoon and late onset of cold weather, there has been a decline in demand from rural areas, which is likely to impact FMCG companies.

Kotak Institutional Equities Also, in its note, it has been said that there has been a trend of declining demand in rural areas. Brokerage houses also say that home consumption and health products may see a hit due to weak consumer sentiment, while discretionary products may see good growth due to good demand in urban areas. They also say that due to the relaxation of restrictions imposed due to COVID-19 and increased consumer spending in the festive season, the urban market may appear to perform better than the rural market.

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Market analysts also say that companies that had increased their product prices due to rise in raw material prices may see a decline in their sales volume growth. Besides, the price hike by these companies will not prove enough to support their margins.

Kotak Institutional Equities It says that in the third quarter, the operating margins of consumer staples companies may see pressure of 50 basis points. This will be due to increase in raw material prices. However, going forward, due to the fall in commodity prices in the December quarter, these companies may get some relief.

Hindustan Unilever Its earnings are expected to grow by 10 per cent in the December quarter, while its volume growth may see a growth of 1 per cent year-on-year.

Edelweiss Securities Says that HUL may remain in some companies whose margins are likely to increase on a yearly basis. At the same time, Kotak says that the income of ITC can see an increase of 11 percent. The company’s cigarette sales are expected to grow by 6 per cent year-on-year.


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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