At 11:23 am, the Nifty FMCG index was up 1% at 30,401 points, as compared to 0.41% rise in the Nifty50 index.
“The calendar year 2019 (CY19) looks to have the potential of turning out to be a good year for consumer staples – at least operationally. The companies are more sanguine on demand environment now than they were 12-18 months back”, according to analysts at JM Financial Institutional Securities.
Crude was seemingly an emerging headwind but prices have dropped significantly in recent days; if prices of the raw material basket stays at the current level for the coming year, then there will probably be nil or very negligible input-costs inflation to deal with in FY20E, the brokerage said.
As per companies, most of the adverse macro factors that impacted growth in recent few years are expected to reverse over the coming years. The recent few years’ monsoons have been better than what they were in 2014- 15. A minimum support price (MSP) framework has been spelt out, and there have been some loan-waivers in a few large states – these are important from a consumer confidence point of view, in our view, it added.
HUL hit a new high of Rs 1,860, up 1% on the NSE in intra-day trade. In past two months, post September quarter (Q2FY19) results, HUL have outperformed the market by surging 23%, as compared to 5% gain in the Nifty 50 index. The country's largest consumer goods company had reported double-digit sales volume growth for a fourth straight quarter.
Analysts at JP Morgan believe a gradual recovery is under way as rural demand stabilises and benefits from lower GST rates (price reduction/grammage increase) start flowing through. Margin tailwinds remain, given mix improvement, manageable input cost inflation, judicious pricing, GST benefits, rational competitive spends and significant cost control measures.
We believe HUL’s initiatives in the areas of margin-accretive innovation, cost savings and market share gains should hold the company in good stead over the medium term, the brokerage firm said with ‘Overweight’ rating on the stock. It was however trading above 12 month target price of Rs 1,750 per share.
Colgate-Palmolive (India) too hit a new high of Rs 1,314, up 3% on the NSE. Since October 30, the stock rallied 19% against 6% rise in the benchmark index.
Colgate’s Q2FY19 was qualitatively encouraging – 7% overall volume growth (8-quarter high on a 2-year CAGR comparison; led more by toothbrush, though) and market-share pickup in toothpaste (improved >100bps QoQ, as per our workings) were the key positive highlights, in our view, JM Financial Institutional Securities said in a note.
Analysts at Equirus Securities think Colgate-Palmolive’s ‘Naturals’ focus has started yielding results, which could boost volumes and stem market share losses over the next 18-24 months.