FMCG share price target

With India set to become as Unilever’s largest market by value overtaking US
(undefined timeline though) (link), we reiterate how Indian consumer MNCs deliver immense value to the parent.

We believe the MNC basket in consumer staples may potentially accelerate new product development (NPD) given the divergent strategies adopted by MNC and Indian players over last two years.

Premiumisation in the Beauty and Personal Care (BPC) category, one of the most loved themes, offers big potential for Indian FMCG companies.

We expect the growth for FMCG companies in Q2FY23 to be in similar line to Q1FY23 driven by pricing, while volumes are expected to remain flat.

Consumer sector overvaluation in Sep’22 is at 29% (per I-Sec Consumer Momentum Indicator (ICMI)) versus 22% in May’22.

We believe Nestle may potentially outperform HUL in long term driven by multiple favourable factors (both extrinsic and intrinsic).

Dairy companies have raised milk selling prices by 8-10% in the past eight months due to sustained rise in milk procurement prices.

Unprecedented inflation and volatility in input costs across commodity baskets over last 12-18 months have led to gross margin decline for most Consumer Staples companies. However, recent correction in a few commodities and management commentary have likely led to consensus expecting operating margin expansion in 2HFY23. We do not agree.

This is NOT a template-based results review report (of aggregate performance, charts et al). This is a portfolio manager summary of the under-appreciated, yet very important takeaways from the 1QFY23 results season.