Q1 results preview: The fast-moving consumer goods (FMCG) companies are witnessing a gradual recovery in demand after a weak base. These players are expected to see a stable-to-improving growth trajectory in the first quarter of FY25.
Within consumer discretionary companies, the cigarettes, alcobev and jewelry segments are expected to see resilience while demand challenges may prevail in QSR, paints and footwear segments.
Kotak Institutional Equities anticipates Q1 results of most FMCG companies to see stable-to-improving volume and value growth trends.
Among FMCG stocks, Honasa Consumer, Tata Consumer Products, Nestle India, Colgate Palmolive and Jyothy Labs are expected to report resilient HSD/DD value growth. MSD value growth (domestic) is likely to be seen from Dabur, Marico, Britannia Industries and Godrej Consumer Products.
However, Hindustan Unilever (HUL) is expected to report flat revenues with overall underwhelming performance on an absolute and relative basis, according to Kotak Equities.
The brokerage expects an improving growth trend from Marico and Britannia Industries and a mixed bag performance from Godrej Consumer Products and Tata Consumer Products.
Here’s a look at Q1 results preview of top FMCG companies:
ITC is expected to report 5.6% revenue growth, with net profit rising 2.6% on a year-on-year (YoY) basis in the June quarter. ITC’s cigarette volume growth in Q1FY25 is expected to be at ~2% YoY, translating into 7% growth in net cigarette sales. Cigarette EBIT growth is estimated to be 5.3%, with a decline in EBIT margin, according to Kotak Equities.
In the FMCG segment, ITC is estimate to report 7% YoY revenue growth with no major sequential price adjustments, along with 10 bps YoY expansion in EBIT margin to 8.4%. ITC’s hotels segment is expected to see 8-9% growth and 250 bps YoY expansion in EBIT margin to 24.5%, the brokerage estimates show.
HUL Q1 results are expected to be similar to Q4FY24, with net profit seen rising marginally by 1.4% YoY and revenue remaining flat. The company is expected to report 31% YoY decline in other operating income due to discontinuation of GSK-CH OTC distribution business in November 2023.
Kotak Equities model marginal ~15 bps QoQ (+210 bps YoY) expansion in gross margin to 52%. It estimate 23.3% EBITDA margin, up 20 bps YoY as gross margin gains on YoY basis are offset by 25 bps effective increase in royalty, increase in A&P intensity to 10.5% of sales continuing with its intent to maintain SOV > SOM, 40-50 bps impact of discontinuation of distribution of OTC products of GSK CH, and adverse operating leverage on fixed expenses.
Nestle India Q1 revenue is likely to grow 10% YoY led by 10% and 20% growth in domestic and exports, partly offset by a decline in other operating income. Volume (tonnage) growth is expected to be at 5%, largely in line with last quarter. This implies some increase in pricing growth which would be driven by price hikes in Maggi and coffee, Kotak Equities said.
EBITDA margin is expected at 23.7%, up 95 bps YoY but down 175 bps QoQ, while EBITDA is likely to grow 14.7% YoY.
Biscuit maker Britannia Industries is estimated to see revenue growth of 5% YoY with net profit growth of 17.7% YoY. EBITDA in Q1FY25 may rise 12.8% and EBITDA margin may expand 125 bps YoY to 18.5%.
Biscuit volumes are expected to rise 7.5%. Consolidated gross margin is likely to contract ~65 bps sequentially to 44.3% as price cuts and higher grammage offsets the impact of soft raw material prices.
Kotak Equities estimates 5.5% and 6.4% YoY domestic volume and revenue growth for Dabur led by double-digit growth in digestives and oral care, HSD growth in home care and MSD growth in hair, F&B, OTC and ethicals, even as skin care and health supplements continue to lag. The company’s net profit is estimated to rise nearly 6% YoY.
Consolidated EBITDA margin in Q1FY25 may expand 30 bps YoY to 19.6% as gross margin is partly offset by increase in A&P spends, resulting in EBITDA growth of 7.9%.
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