The demonstration of growing reliance on welfare-driven mandates in the recently concluded state elections in India, along with an expected uptick in winter demand has brought attention to FMCG stocks.
Even though urban demand remains an issue, the uptake of winter portfolios in November is likely to provide a boost to the sector in the coming months.
Growth avenues, especially in the rural markets have opened up for a clutch of Indian FMCG stocks with Colgate-Palmolive (India), Britannia, Bikaji, Hindustan Unilever, and Emami emerging as top beneficiaries, with gains also expected for Marico, Godrej Consumer, ITC, Varun Beverages, and Dabur, analysts say.
Global brokerages have zoomed into two FMCG majors which could provide an upside of 10-18%.
‘Buy’ rating on Marico
Goldman Sachs has reiterated a Buy rating on Marico, assigning a target price of ₹720, representing a potential 10% upside from its current market price of ₹650.
Despite challenging macroeconomic conditions, Marico has managed to sustain growth, driven by its flagship brand, Parachute, which continues to gain market share even as input cost inflation persists.
The company’s Saffola portfolio has emerged as a key growth driver, particularly in the foods and digital-first brands segment, which is witnessing robust expansion and improving profitability metrics.
In the edible oils segment, price-led growth has further strengthened Marico’s performance.
However, the Value-Added Hair Oils (VAHO) category remains a weaker area, although it is no longer a significant drag on the company’s overall growth.
Copra inflation has marginally impacted margins, but Marico is well-positioned to sustain its momentum.
Marico’s stock has delivered strong returns, climbing 24.26% over the past year and 301.27% over the past decade.
The company is also a consistent dividend payer, distributing ₹6.50 per share to shareholders in March 2024.
With a market capitalization of ₹84,172.39 crore as of November 27, Marico continues to be a key player in the FMCG space.
‘Buy’ rating on Colgate-Palmolive
Jefferies has maintained a Buy rating on Colgate-Palmolive, setting a target price of ₹3,570, an 18% upside from its current price of ₹3,019.
The company’s strategy revolves around encouraging consumers to up-trade and increase per capita consumption, especially in urban markets.
Initiatives such as promoting brushing twice a day and improving rural oral health awareness underpin its growth efforts.
Colgate’s management aims to strike a balance between volume, mix, and price growth.
While urban growth has slowed and rural recovery has plateaued, the company remains optimistic about a balanced approach to drive future performance.
In addition, Colgate is expanding its focus beyond oral care, exploring opportunities in personal care by leveraging its global parent company’s portfolio.
These efforts include interventions across the value chain—spanning product innovation, packaging, advertising, and distribution.
While Jefferies and Nuvama Institutional Equities express optimism about Colgate-Palmolive’s strategies, international brokerages like Goldman Sachs and Citi are cautious about the company’s near-term earnings growth.
Citi notes that urban consumption trends remain weak, reflecting a broader slowdown in discretionary spending.
FMCG sector faces muted demand
India’s FMCG sector has experienced muted demand in recent months due to weak festive sales, urban consumption pressures, and delayed winter conditions affecting seasonal product sales.
Heavy rainfall and heightened competition further dampened topline growth in the second quarter.
However, the sector is expected to recover in the coming months, with the uptake of winter portfolios in November likely to provide a boost.
Despite short-term challenges, analysts remain optimistic about long-term growth, driven by strategic initiatives and strong brand equity across key players like Marico and Colgate-Palmolive.
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