FMCG Stocks Outlook for the week - 31.07.02017 to 04.08.2017

FMCG Stocks Outlook for the week - 31.07.02017 to 04.08.2017

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FMCG Stocks Outlook for the week - 31.07.02017 to 04.08.2017 )

Stocks of most fast-moving-consumer-goods companies are seen rising next week, in line with the broader markets and as results of bellwether companies such as Hindustan Unilever Ltd and ITC Ltd have been above market expectations. While HUL reported a 5% year-on-year rise in net revenue for Apr-Jun, cigarette-to-hotel conglomerate ITC reported a 9% growth in the FMCG segment, despite de-stocking pressure. ITC also hiked prices of most of its cigarette brands retrospectively to offset the hike in cess on filter cigarettes under goods and services tax. Stocks of ITC are expected to rise further next week and could touch 320-rupee levels. ITC has successfully built FMCG brands. Aashirvaad, Sunfeast, Classmate, and Bingo. Additionally, entry into new segments like dairy with
Aashirvaad Svasti ghee, premium chocolates Flabelle, juices B Naturals and Coffee Sunbean bodes well for the company's long-term revenue target. Most FMCG companies witnessed an average month-on-month jump of 5.4% in overall sales volume in the first fortnight of July, just after implementation of the new indirect tax regime. However, categories which declined were personal care products which showed volume sales decline of 7.9% and soft drinks which had lower volumes of 7.8%. This decline could be due to de-stocking of non-essential goods by dealers. Among bellwether companies, HUL is experiencing a smooth transition to the good and services tax
regime, and the company's priority now would be to communicate with trade and improve filling in trade pipelines. Stocks of HUL are expected to rise with increased launches in the natural space and higher rate for herbal products under the goods and services tax. A good monsoon this year will help increase rural demand for most FMCG companies and sales numbers could improve after October. Most FMCG companies are expected to gain due to the input tax credit benefits under the new tax regime. Input credit is the system by which organised companies, at the time of paying tax on output, can deduct the tax they have already paid on inputs.

Source : Cogencis Information Services Ltd.