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Shares of fast moving consumer goods (FMCG) companies were under pressure for the second straight day on Wednesday, falling nearly 5 per cent during the period, on concerns of slowing sales in the rural market.
On Tuesday, the country’s largest FMCG company, Hindustan Unilever (HUL), posted a 9 per cent year-on-year (YoY) rise in net profit at Rs 2,187 crore for the July-September quarter (Q2 of FY22). This was marginally lower than the Rs 2,195 crore estimated by Bloomberg. While volume growth at 4 per cent was weaker than the 9 per cent in the June quarter, the company indicated that it was on account of a higher base for Q2. CLICK HERE FOR FULL REPORT
Following the Q2 results, the stock of HUL has declined 9 per cent from its Tuesday’s intra-day high of Rs 2,732 on the BSE. At 12:12 pm, the stock was down 1.7 per cent at Rs 2,504, as compared to a 0.54 per cent dip in the S&P BSE Sensex. Meanwhile, the S&P BSE FMCG index, which fell 1.62 per cent in intra-day trade today, has slipped 4.5 per cent in the past two trading days.
HUL’s management said the September quarter witnessed a sequential improvement in trading conditions, albeit remained challenging with unprecedented levels of input cost inflation and subdued consumer sentiments. “Looking forward, we remain cautiously optimistic about demand recovery. In these times of uncertainty and unprecedented input cost inflation, we continue to firmly focus in delivering consistent, competitive, profitable and responsible Growth,” it said.
Nevertheless, Motilal Oswal Financial Services believes with the gradual unlocking, HUL stands to be the biggest beneficiary of urban recovery relative to staples peers. “With mix improvement and price increases, incremental concerns on commodity costs also appear to be lower than before. Thus, the earnings outlook is likely to be better v/s staples peers going ahead,” the brokerage firm said in result update.
HUL’s earnings have underperformed peers’ earnings in recent quarters owing to a higher proportion of the Discretionary/OOH portfolio at 15–20 per cent of sales and steep commodity cost inflation in its three largest categories – soaps, detergents, and tea, it added.
Separately, shares of ITC dropped 1.5 per cent at Rs 242.55 in the intra-day today, falling nearly 8 per cent in the past two trading days amid reports that the government has set-up a panel to mull taxation policy on tobacco products.
Among other FMCG stocks, Marico, VST Industries, Dabur India, Tata Consumer Products, Colgate-Palmolive (India) were down in the range of 2 to 3 per cent in the intra-day trade today.
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