FMCG Sector's Revenue Growth Slows, Margins Expand Moderately: Q4 Outlook

Analysts predict subdued earnings growth for Indian consumer goods companies in Q4 FY24. While FMCG revenues are anticipated to grow slightly faster, profit growth is expected to lag behind previous trends. The volume growth in the FMCG sector for the quarter ending March 2024 is projected to be challenging, driven by urban demand, with rural demand showing flat to low single-digit growth in many categories. 

International operations of FMCG companies are expected to outperform their India operations. Despite a slight rise in demand for winter care products, weak summer demand for carbonated beverages, attributed to unseasonal rains, is anticipated to improve in Q1FY25 due to predicted extreme heat conditions by IMD. 

Overall, consumer goods companies are estimated to achieve a 2 per cent revenue growth in Q4FY24, with EBITDA and net profit growth pegged at 5 per cent each on a year-on-year basis, according to a report by Nuvama Institutional Equities. The report suggests that demand trends are stable compared to Q3, with expectations of revived consumer demand from Q2FY25 onwards, driven by factors like anticipated good monsoons, upcoming general elections and potential freebies. Additionally, positive movements in real rural wages are observed, indicating a promising trajectory for consumer demand.