NIFTY FMCG index has significantly increased since the Q1FY23 results

The majority of businesses increased prices by 10 to 15 percent in the previous year to reflect the high inflation in palm oil, crude derivatives, and agricultural commodities. As a result, FMCG companies had price-led revenue growth in Q1FY23. Due to the low base in Q1FY21 as a result of the COVID-19 pandemic, even the higher YoY growth figures for volumes and revenue were not entirely reliable. Despite rising RM inflation’s strain on margins, only a small number of FMCG companies reported strong yearly growth in Q1FY23, yet the NIFTY FMCG increased by 17% after FMCG Q1FY23 results. While those businesses benefited from the rise in demand for FMCG goods, which may be linked to the economy’s opening up, the robust monsoon, and the approaching holiday season.

Nifty FMCG index hit its 52-week low in March, after which it went sideways in Q1FY23, from April to June, and by the conclusion of Q1FY23, NIFTY FMCG increased by 17% after FMCG Q1FY23 results. This increase in the index may be attributed to FMCG companies’ Q1 results, which increased the index’s value and provided investors with sizable profits. As we have already examined a number of NIFTY50 companies on our website Univest, including FMCG companies like HUF, ITC, Dabur, Varun Beverages, and others, let’s now look at the overall performance of the FMCG sector in Q1FY23 and determine whether it will prove to be a sound investment in the future.

The margins of HUF and a few other FMCG businesses were impacted by higher commodity prices, 

The majority of commodity prices appear to have peaked in June 2022 and then begun to decline significantly. Although the price of palm oil has decreased 30% from its peak, the average price was up 54% from the previous quarter (Q1FY22) to Q1FY23. In a similar vein, the price of crude oil has begun to decline from its top but continues to trade above $100 a barrel. Wheat and sugar exports have been deliberately limited by the government, which has also lowered agricultural commodity prices.
Due to RM inflation, HUF reported an EBITDA Margin of 23.2%, which was below expectations; nonetheless, the premiumization of products has enabled detergents and tea industries to increase their EBITDA margins. While strong year-over-year growth was seen across all market categories, making it the most popular investment option in this sector.

As opposed to ITC, which not only reported strong YoY growth across all segments but also provided investors with favorable returns following Q1FY23 results, Its PAT has increased by 34% YoY, with a 28% YoY increase in sales and a nearly 336.2% YoY increase in their hotel business.
Even Dabur, whose foreign business had double-digit growth, experienced strong QoQ growth in both the top and bottom lines. The fact that the EMA made a bullish crossover in August 2022 supports the idea that Dabur is likewise prepared to trend higher over the medium term.

Now Moving on to Varun Beverages, it had a 50% YoY increase in net profits along with a doubling of revenue in Q1FY23. Even their recently revealed capital expenditure plans and the introduction of Sting, which has the potential to win market share across all of India, have had a positive impact on their stock price, which is currently trading at an all-time high.

In Q1FY23, Godrej and Marico revealed themselves to be lame, NIFTY FMCG increased by 17% after FMCG Q1FY23 results

On August 2, Godrej Consumer Products announced its Q1FY23 financial results, saying that higher input costs caused the company’s profit to decline 17% to Rs 345 crore. Nevertheless, its total operating revenue increased by 8% YoY to Rs 3,125 crore, with Indian businesses expanding by 12%.
Godrej Consumer thus continues to have a long gestation period. While performance in Indonesia might improve due to macroeconomic factors, the challenges in India and Africa seem daunting.
According to Marico, business volumes in India decreased by a mid-single-digit percentage during the first quarter. Saffola Oils saw a double-digit volume reduction despite Parachute Coconut Oil, the company’s flagship brand, showing a minor volume decline because of a high base from Q1FY22 and other factors.

Conclusion

The largest market share increase for HUL in a decade occurred in FY22. Furthermore, certain FMCG companies, including HUL and Britannia, may have reached their bottom in terms of gross margins. The majority of FMCG companies have Neutral fundamentals, even on the Univest App. Despite this, a select few companies, like ITC, HUL, and Varun Beverages, are seeing bullish momentum over the long and near terms.
In a year, ITC stock has increased by roughly 55%. There is certainly room for growth considering that so many analysts have ITC shares rated as a buy. The large FMCG company’s stock has just risen to a new 52-week high and has been trading in close proximity to it. After 5 years, ITC increased its market value to Rs 4 trillion by riding the wave of a massive buying frenzy. Therefore, upon the release of Q2FY23 data, investors may want to think about buying a few certain FMCG stocks and rebalancing their portfolios.

Also Read – https://www.ziparticle.com/what-size-should-i-get-of-great-dane-puppy/