FMCG share price target

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

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.

Following a sharp rally post the RussiaUkraine conflict, prices of most commodities, such as crude, copper, aluminum, steel and palm oil, corrected 17%40% from the top.

In terms of what is happening in the market, the retail industry has gone through dramatic changes more than you see in a lifetime. Covid-19 has permanently changed consumer behavior. But with increasing vaccination rate, people are coming out and doing what they couldn’t do for two years.