FMCG revenue seen rising 14.8% in Q3 on better rural demand

Fast moving consumer goods (FMCG) players, who have been benched for the past two years, are expected to see a revenue growth of 14.8 per cent in the December quarter despite flat margins, says a report.

The optimism comes from improved consumer sentiment, and gradual rise in rural demand, says a report by domestic brokerage ICICI Securities.

In the September quarter, the sector clipped at a low 5.2 per cent.

“We believe the acceleration in revenue growth is largely attributable to a pick-up in consumer sentiment, gradual demand pick-up in rural areas and also due to a lower base,” the report said today.

But the brokerage expects gross margins to remain flat with an expected 160 bps rise due to operating leverage benefits and lower other expenditure. We expect post-tax profit to jump 29 per cent,” it noted.

The key things to watch out for this quarter will be volume growth and pre-tax profit growth.

After the re-stocking in the September quarter, the trade inventory is perceived to be largely normalized and companies with higher focus on direct distribution continue to outperform against the others who have higher dependence on wholesale and CSD channel, the report noted.

Also, the shift from unorganised to organised will benefit although the same has been gradual and will happen over a period of time.