Demand trends in the domestic market for Q1FY24 continue to be in line with those of the previous few quarters. While urban markets were steady, the pick-up in rural demand, which companies expected, remained elusive for most companies.”
The June 2023 quarter was the mixed quarter for India Inc with majority companies across industries reporting in-line results for the first quarter of FY23, except for few that either surpassed expectations while many others missed analysts’ estimates. In that, the FMCG sector saw weak demand during Q1FY24, with low-single digit volume growth reported by most staple categories. “The low reported growth of the listed companies may also reflect their loss of market share to regional players. Nonetheless, we note that demand recovery has been quite long-drawn in the rural economy. Barring a few companies in the discretionary segments such as paints, volume growth remains modest with 1) FMCG business of HUVR showing 3 per cent growth, 2) BRIT reporting 4.5 per cent growth and 3) DABUR seeing a modest 3 per cent growth,” said Amit Agarwal Vice President – Fundamental Research, Kotak Securities Ltd.
While most consumer companies witnessed a sharp improvement on-year basis and modest improvement in gross and EBITDA margins on a QoQ basis, A&P expenditure increased marginally sequentially. Meanwhile, Kunal Vora from BNP Paribas Securities India, said, “Raw material (RM) prices peaked in Q1FY23 and continued to soften since then. It further corrected in Q1FY24, with several key RMs such as crude, palm oil, copra, coffee, rice bran, palm fatty acid distillate (PFAD) and linear alkyl benzene (LAB) correcting YoY. This led to QoQ and YoY improvements in Q1FY24 gross margins for most companies.
“Demand trends in the domestic market for Q1FY24 continue to be in line with those of the previous few quarters. While urban markets were steady, the pick-up in rural demand, which companies expected, remained elusive for most companies,” he said.
However, according to NielsenIQ data, India’s organised retail sector, accounting for approximately 12 per cent of total FMCG sales, witnessed its highest growth in six quarters, recording a year-on-year surge of 21.1 per cent during the April-June period. This growth was fueled by a stable urban demand environment.
Source: https://shorturl.at/cdQ16
