fmcg stocks: FMCG stocks in sweet spot: BNP Paribas picks 3 stocks to buy – Blue Barrows

FMCG companies in the second half of the ongoing fiscal year are seen to be in a sweet spot given their calibrated approach in price hikes and reduction in prices of key input commodities such as crude and palm oil.
in its report on the segment has detailed the price trend across 20 FMCG product categories after tracking over 150 products from the space over the last 12 months period amid the high inflation in raw materials, fuel and packing materials.

In the personal care segment, while there was muted price action in segments such as face moisturisers and VAHO or value-added hair oil earlier, a price hike was implemented among select SKUs last month. Further, while the price of SKUs in shampoos as well as bodycare products remained relatively stable in the last two month, the year-on-year change has been in double digits for shampoos in case of several of the SKUs.

In the VAHO category, the companies took to price hikes after light liquid paraffin prices rose.

In the foods business, companies have implemented grammage cuts for biscuits as an increase in the cost of wheat weighed. Brands like Marie Gold, Milk Bikis, Krack Jack saw price hikes in the last two months, while price for Parle-G increased by 20% in the last six months. Reputed FMCG firm

has also increased the price of its Coffee but with a lag.

In home care, price hikes in detergents continued as companies passed on the higher input cost of linear alkyl benzene (LAB) in 1QFY23.

BNP Paribas maintains that FMCG companies during the second half of the fiscal year 2023 will see recovery in volumes as well as margins. So, given the backdrop, BNP Paribas’ preferred picks in its FMCG coverage are , and .

The brokerage mentioned that hikes in the biscuit category as well as softening in the raw material cost shall bode well for Britannia’s margin recovery. For the FMCG major, BNP sets out a target price of Rs. 4330 and iterates that “we value Britannia at 45x Sep-24 P/E”.

For ITC, BNP Paribas finds its valuations attractive relative to the sector. The brokerage has given a target price of Rs. 360 per share. The brokerage sees steep increase in taxation on cigarettes as well as higher than expected increase in raw material cost as the key downside risk for the stock.

“Emami is well positioned to benefit from a rural recovery and trades at an attractive valuation”, notes the brokerage. On the stock, BNP Paribas has set out a target price of Rs 600 per share.

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