Thus far in the current calendar year 2018 (CY18), the FMCG index has rallied 11% against 4% rise in the benchmark index. Jubilant FoodWorks (up 61%), Britannia Industries (35%), GCPL (26%) and HUL (23%) were up more than 20% during this period.
Most FMCG companies posted double digit volume growth in FY18. The after-effects of GST and demonetization are behind. Third consecutive year of normal monsoon and six-year-high MSP hikes announced by the government add to the overall cheer on the consumption front, analysts say.
“For Q1FY19, FMCG companies are expected to post sales growth of 12.9% mainly on the back of low base of Q1FY18, impacted by de-stocking by trade channels in the wake of implementation of GST”, according to an ICICI Securities note.
"The growth would also be propelled by price cuts due to lower GST rates (announced in November 2017), pick-up in rural demand led by higher government spending, newer launches and increased consumer promotions. We expect organic volume growth at 8-10% across companies. We expect a demand revival in the overall sector driven by normalcy in trade channels, demand recovery in rural regions considering expected normal monsoons in 2018," the brokerage firm said in Q1FY19 result preview report.
Analysts at Motill Oswal expect the consumption recovery to continue and strengthen further, given the background of multiple elections ahead. "We expect the government to remain supportive of consumption demand. Increased government infrastructure spending also augurs well for consumption, in our view,” they said in result preview report.