Amid FMCG slowdown, 3 stocks stand out, rally to hit new highs

Lingering concerns over consumer demand amid a slowdown in the economy have left most of the fast moving consumer goods (FMCG) stocks in the red so far this year. But three stocks – Nestle, Marico and Glaxosmithkline Consumer Healthcare – have stood apart and hovered around their new peaks on the bourses on Wednesday.

The country’s largest biscuit maker, Parle Products, on Tuesday said it may let go of 8,000-10,000 people if the ongoing consumption slowdown persists.

Nestle India Chairman & Managing Director Suresh Narayanan told PTI earlier that the FMCG sector is unlikely to touch double-digit growth, but will not see de-growth as witnessed by some other sectors, like auto.

Shares of Nestle and GlaxoSmithklne Consumer hit all-time highs at Rs 12,523 and Rs 8,010 on Wednesday, while Marico scaled its record high of Rs 401 on August 19.

Nestle shares advanced as much as 5 per cent on hopes that the stock may be in the reckoning for inclusion in the Nifty50 index after NSE tweaked the qualification norms on Tuesday.

GlaxoSmithklne Consumer posted strong operating profit performance for June quarter driven by some cost-saving initiatives.

“We are also overweight on the FMCG pack,” said Dhananjay Sinha, Head of Strategy Research and Chief Economist, IDFC Securities.

“HUL, Dabur and Marico besides electric consumer durables firm Crompton Consumers are the four stocks we have chosen to bet on,” he said in an interaction with ETNow.

Marico on August 1 reported a 21.6 per cent growth in June quarter profit at Rs 315 crore compared with Rs 250 crore in the year-on period.

Shares of other FMCG firms such as McLeod Russel, Kwality, LT Foods, Heritage Foods, Parag Milk Foods, Prabhat Dairy, Future Consumer, Bajaj Consumer Care, Tata Coffee, Godrej Consumer Products and Britannia are down 20-90 per cent so far this year.

Last month, market researcher Nielsen revised its growth forecast for the FMCG sector to 9-10 per cent for 2019 from its previous outlook of 11-12 per cent, citing a sharp rural slowdown. Nielsen said the slowdown was significant across all food as well as non-food categories, with salty snacks, biscuits, spices, soaps and packaged tea categories showing major slowdown in consumption.

Citing Nielsen data, industry officials said growth in the FMCG sector has declined in last four quarters since July-September 2018 – both in value and volume terms – as consumers down-traded to lower-priced daily use products in urban markets while rural growth slowed.