Godrej
FMCG industry leaders anticipate a 2-4% price increase to safeguard their delicate profit margins
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Godrej Consumer Products and Emami are two major players in the consumer goods industry in India who are struggling with the high prices of palm oil. According to their CEOs, Sudhir Sitapati and, respectively, the high prices of palm oil derivatives, such as PFAD, have necessitated sharp price increases, grammage cuts, and trade scheme reductions, leading to trade destocking. Sitapati also stated that there is a requirement for one or two more rounds of pricing in soaps to get back to the company’s normative margins.
Godrej Consumer Products anticipates an operating margin of 22-26% for fiscal 2025, provided raw material costs remain stable. Emami, on the other hand, expects further 1-1.5% price increases in the coming quarters, on top of the 2% hike it took in the December quarter.
Britannia Industries has already announced a price hike of 4-5% in the current quarter and plans to take further pricing actions over the next nine months to maintain its margins. Marico Ltd has taken a 10% price hike in coconut oil and 20% in edible oil so far this fiscal, but has stated that further price hikes are necessary to cushion its profit margins.
All of these companies, including Godrej Consumer Products, Emami, Britannia Industries, and Marico, are struggling with high raw material costs, particularly copra and vegetable oil prices. They are expecting to take more price hikes in the coming quarters to maintain their profit margins. The situation is expected to continue for the foreseeable future, as the prices of these raw materials are expected to remain high.
Today, January 24th, 2025, saw shares of Hindustan Unilever, Britannia Industries, Dr Reddys Laboratories, and Trent dominate trading activity; additional details available here.
The Nifty Index closed at 23,205.35, down 0.49% from the previous day. The Sensex also declined 0.43% to 76,520.38. The Midcap index underperformed the Nifty 50, falling 1.21% to 17,364.55, while the Nifty Small Cap 100 lost 2.35% to 17,396.45.
Among the top gainers, Hindustan Unilever led the pack with a 2% gain, followed by Britannia Industries, Eicher Motors, Grasim Industries, and Tata Consumer. The top losers included Dr. Reddy’s Laboratories, Trent, Mahindra & Mahindra, Adani Enterprises, and Bharat Petroleum Corporation.
The Bank Nifty ended the day at 48,589.00, with an intraday high of 48,858.65 and a low of 48,203.00. It has underperformed the Nifty 50, falling 0.38% over the last week.
The report also lists the top gainers and losers for various market segments, including Nifty 50, Nifty Midcap 50, and Nifty Small Cap 100. Some of the top gainers include Mphasis, Au Small Finance Bank, Persistent Systems, Indian Hotels Company, and Dixon Technologies (India). The top losers include Polycab India, Supreme Industries, Oberoi Realty, Suzlon Energy, and Godrej Properties.
BNP Paribas highlights growth prospects in consumer staples, with optimistic views on HUL, Britannia Industries, and Titan, driving opportunities in the discretionary consumer space.
The article predicts a subdued performance in Q3 FY25 for staple segments in the Indian consumer goods space. However, discretionary segments are expected to show resilience. Key consumer goods companies, such as Hindustan Unilever and ITC, are likely to report higher operating profit growth, while Gharam India’s Godrej Consumer Products (GCPL) may struggle to keep pace.
The article also highlights that affluent consumption is likely to be a stronger growth driver compared to mass consumption. This suggests that high-end and premium products are more likely to see growth, while mass-market products may face challenges.
Despite the challenges, the article suggests that investors may find opportunities in strategic picks like Hindustan Unilever, Britannia Industries, and Titan Company, all of which operate in the discretionary segment. These companies are well-positioned to benefit from the shift towards premium and high-end products.
The article is written from the perspective of an expert, providing analysis and insights on the Indian consumer goods space. The author suggests that while challenges persist, strategic picks like Hindustan Unilever, Britannia Industries, and Titan Company offer opportunities for investors looking to invest in the industry.
The article is not meant to be taken as financial advice, but rather as a commentary on the current trends and prospects in the consumer goods industry. As such, investors should seek additional information and research before making any investment decisions.
We are bullish on Hindustan Unilever (HUL), Britannia Industries, and Titan Industries in the consumer discretionary sector, considering the companies’ ability to navigate challenges and capitalize on opportunities.
Here is a 400-word summary of the content:
The Indian consumer goods market is expected to experience subdued performance in the third quarter of FY25, with staples being affected more than discretionary segments. Despite challenges, some companies, such as Hindustan Unilever, ITC, and Britannia Industries, are likely to report higher operating profit growth. However, Godrej Consumer Products (GCPL) might struggle to keep up.
Affluent consumption is seen as a stronger growth driver compared to mass consumption, which is expected to be more affected by the current economic environment. Despite these challenges, there are opportunities in the market, particularly for strategic picks like Hindustan Unilever, Britannia Industries, and Titan Company.
The outlook for Q3 FY25 is challenging, with various factors such as rubber-necking, inventory correction, and price wars affecting the consumer goods industry. However, a few companies are well-positioned to navigate these headwinds and deliver better performance.
Hindustan Unilever, for instance, is expected to benefit from its strong portfolio of brands and its ability to attract and retain high-value customers. ITC, another strong performer, will likely benefit from its diversified business model, which includes tobacco, agri-business, and FMCG segments. Britannia Industries, a leading player in the bakery and confectionery space, will also benefit from its strong brand presence and strong distribution network.
On the other hand, GCPL, while having a strong portfolio of brands, may struggle to maintain its growth pace due to intense competition and pricing pressure. Nevertheless, even GCPL has its strengths, such as its Amway and Pulse confectionery businesses, which can continue to perform well.
Despite the challenges, these strategic picks offer attractive long-term opportunities for investors. Their diversified business models, strong brand presence, and ability to adapt to changing consumer preferences will help them navigate the tough landscape and emerge stronger. As such, investors should consider these companies for inclusion in their portfolios.