FMCG stocks in focus: HUL, Britannia, Nestle India hit new highs

Shares of fast moving consumer goods (FMCG) companies such as Hindustan Unilever (HUL), Britannia Industries, Nestle India and Jubilant FoodWorks have hit their respective new highs on the BSE on expectation of good profit growth.

Thus far in the month of April, all these four stocks have outperformed the market by gaining in the range of 8% to 9% on the BSE. On comparison, the S&P BSE Sensex and S&P BSE FMCG index were up 4% and 5%, respectively.

Analysts at Edelweiss Securities expect consumer goods companies to see revival on both fronts, on volume growth and margin expansion from here on. With few state elections, expected populist budget, rural consumption should benefit. This coupled with improving macros and hopefully a good monsoon should also augur well for the sector.

Jubilant FoodWorks, the largest gainer among the pace, hit a new high of Rs 2,539, up 9% thus far in current month. The stock rallied 44% so far in the calendar year 2018, against 0.96% rise in the benchmark index.

IIFL Institutional Equities, maintain ‘buy’ rating on the stock with a 12 month target price of Rs 2,800. The brokerage firm expects continued strength in Jubilant FoodWorks same-store sales (SSS) growth in FY19/20 given its investments in product innovations and improved quality; price increase in Nov-18; and national roll out of its “Everyday Value” offering for regular pizza. Further, margins should benefit from break-even in Dunkin’ format, automation and scale benefits from Greater Noida commissary and continued benefits from cost saving initiatives.

Nestle India hit new hit a new high of Rs 8,920, up for the fourth straight trading days on the BSE. Emkay Global Financial Services have ‘accumulate’ rating on the stock with target price of Rs 9,900 as given the meaningful recovery in growth, huge potential for Nestle categories, high FCF (free cash flow) generation and scope for further earnings upgrades, analysts believe Nestle can re-rate further and regain its historical valuation premium to industry.

Nestle India’s recovery is gaining momentum, with recent growth outperforming peers, driven by new CEO’s strategy to focus on volume-led growth, drive a faster pace of innovation and expand distribution. With a revitalised core portfolio and increased focus on growth, we believe that Nestle’s new strategy can deliver higher growth vs. peers given the huge growth opportunity in its core categories, the brokerage firm said in company update.

Company 29/12/2017 28/03/2018 17/04/2018 % chg* % chg#
Jubilant Food. 1762.05 2326.65 2538.75 44.08 9.12
Britannia Inds. 4715.75 4971.45 5407.00 14.66 8.76
Nestle India 7845.00 8202.15 8920.00 13.70 8.75
Hind. Unilever 1368.10 1335.90 1438.00 5.11 7.64
Sensex 34056.80 32968.70 34385.00 0.96 4.30
S&P BSE FMCG Index 10695.18 10290.14 10787.62 0.86 4.83
* % change over December 2017
# % change over March 2018


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