Brokerage BNP Paribas believes that Indian FMCG companies are poised for recovery in volumes and margins from 2HFY23. The upward trend in prices continues, albeit at a slower pace, as companies took calibrated price hikes to offset the effects of inflation seen in previous quarters and BNP believes this will allow companies to move forward starting 2HFY23. into the margin sweet spot as the lag effect of price increases continues while raw material costs soften.
BNP Paribas’ top stock picks Its FMCG coverage includes ITC, Britannia and Emami. “Our price tracker indicates further increase in prices in the biscuit category and reduction in raw material cost, which should augur well for Britannia’s margin recovery. We find ITC’s valuation attractive relative to the sector and its historical valuation. Emami is well positioned to benefit from rural recovery and trades at attractive valuations.”
Top FMCG Stock Picks of BNP Paribas –
Its buy rating on Britannia shares is . comes with a target price of 4,330. However, according to the brokerage, the downside risk is raw material cost inflation, resulting in expected margin pressures, declining cash distributions, i.e. an increase in group ICDs, or an increase in the % of CFOs invested in ICDs and other financial investments.
Meanwhile there is a buy tag on Emami with a target price of 600. “Risk to our thesis: Downside Risk: Poor consumer sentiment may impact demand as over 50% of the portfolio is discretionary in nature,” it said.
BNP Paribas has a buy tag ITC share with a target price of 360 a steep increase in taxation on cigarettes, with the risk of exceeding the expected increase in raw material costs 360.
“Following the increase in the quantum of price hike in 1QFY23, the trend has eased in line with moderation in the cost of key commodities. All major companies have seen an increase in detergent prices along with the increase in prices. However, the sequential price hike was in singles. points,” highlighted this.
The companies have made significant cumulative price increases over the past year leading to an increase in the volume of the FMCG industry. However, if prices of key commodities continue to soften, we can see companies passing on benefits to consumers to boost volume growth, as has already been seen in the case of Parachute and edible oils. . BNP believes that this could result in increased sales with margin recovery in the medium term.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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