FMCG shares on a roll; HUL, Marico, Nestle hit record high

Shares of fast moving consumer goods (FMCG) companies are on a roll with most of the frontline companies such as Hindustan Unilever, Marico and Nestle India are trading at their respective lifetime highs on the BSE.

Marico, the largest gainer among FMCG pack, has rallied 9% to Rs 364, also its record high on BSE. In past two trading sessions, the stock rallied 15% from Rs 317 on January 12, after foreign fund house Oppenheimer offloaded 5.93 million shares of consumer products at an average price of Rs 319.01 apiece, valuing the transaction at Rs 189.14 crore. The name of the buyers not ascertained immediately.

Hindustan Lever (HUL) up 2.5% at Rs 907, after hitting a fresh record high of Rs 914 on BSE in early morning trade. The stock surged 20% in past eight trading days after seven brokerages, including Deutsche Bank, Credit Suisse and JPMorgan, have upgraded the stock ahead of its third quarter results announcement on January 19.

Nestle India (up 2.4% at Rs 6,865), Gillette India (up 2.4% at Rs 3,491), Dabur India (2% at Rs 240), Britannia Industries (1.4% at Rs 1,970), Godrej Consumer Products (1% at Rs 1,088) and Colgate-Palmolive (up 1% at Rs 1,952) are among the others from FMCG pack trading higher between 1-2% on BSE. The benchmark S&P BSE Sensex was up 0.04% or 11.98 points at 27,438 at 1100 hour

Analyst at  SBI Securities expects the top line and bottom line growth of the FMCG sector to be around 13% year-on-year (YOY) in October-December 2014 quarter, of which volume growth will be 5%.

The raw material basket in terms of critical commodities like crude oil (-54%), LLP (-27% YoY), crude palm oil or CPO (-4% YoY), titanium dioxide (-4% YoY) and tea (just 3% up YoY) saw significant correction during the quarter and we believe that most of the companies will benefit from the same, said analyst in a result preview.

“We believe that there are strong tailwinds like pickup in demand, decline in input cost prices and Goods and Services Tax (GST) benefits from 2016”, said analyst at Prabhudas Lilladher.

Analyst at India Infoline expects that most of the FMCG companies are expected to start witnessing margin expansion aided by correction in key raw material prices. However, since the companies are already holding inventory at higher prices, the full benefit is expected to flow in with a lag in Q4 FY15 and Q1 FY16.

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