FMCG Q4 Results Preview - Volumes, Sales Growth Under Pressure, Recovery To Take Time: Nirmal Bang

Nirmal Bang Report

Early commentaries from some fast moving consumer good players like Marico Ltd., Dabur India Ltd. and Godrej Consumer Products Ltd. and our interactions with management of other staple companies as well as channel checks done in February 2024 and March 2024 suggest that the overall demand environment remained subdued during the quarter and has not seen any major improvement.

While volume growth remained under pressure, it was largely led by the urban market, which was buoyant. But, the gap between urban and rural market has narrowed further in this quarter.

Q4 FY24 is likely to witness significant YoY gross margin expansion for several FMCG companies due to deflation in raw material prices, but rising ad spends, modest realization growth vs preceding quarters and persistently tepid volume growth mean that cumulative Ebitda margin is likely to remain flat, with absolute Ebitda growing slightly ahead of revenue growth. As highlighted in our commodity cost note released in Feb-24, prices of raw materials such as vegetables and sugar remain elevated on a YoY basis.

We are expecting our FMCG coverage universe to clock low single-digit revenue growth of 3.3% YoY.

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