FMCG Q2FY27 Results Preview: 12% Revenue Growth Expected; Which Stocks Could Gain?

The earning season has started and the FMCG companies in India are expected to report healthy sales growth for the July-September quarter, but profit is likely to lag as input costs rise.

For the sector about 12% YoY growth in revenue is expected for this quarter overall, meanwhile EBITDA and adjusted profit falling 3% YoY each, mainly because of ITC as per HDFC Securities (HSIE), in its Q2FY27 earnings preview. Excluding ITC, the brokerage expects revenue up 14%, EBITDA up 13% and adjusted PAT up 15%.

Sector Preview

HSIE maintains an underweight stance on the sector. It argues that FMCG valuations keep falling because earnings visibility is weak and the moats of traditional players are eroding.

"With multiple trends fragmenting demand, traditional players have limited participation, which continues to weigh on growth visibility. Amid sustained inflationary pressure, the need for price hikes is rising, potentially impacting volumes ahead. As companies attempt to balance growth and margins, we expect earnings stress to persist. Against this backdrop, our stance remains selective, with preference for stronger execution-led players. We now favor Nestlé India, Godrej Consumer, Britannia, Honasa Consumer, Emami, and Bikaji." the report mentioned.

The report points to sharp raw material increases. Sugar is up about 20% YoY, crude palm oil about 21%, sunflower oil 26%, soybean 43% and crude oil 34%. The rupee has also weakened, with the average USD rate up 9% YoY at Rs. 95.6.

Nielsen data cited in the report shows the sector's volume down 4% and value down 2% in the April-June quarter. Rising prices could weigh on volumes ahead.

FMCG Winners and laggards For Q2FY27

As per HDFC Securities, Nestle India, Marico, Colgate-Palmolive and Honasa Consumers are expected to post the strongest earnings this quarter helped by margin expansion. Nestle India is seen with 21% revenue growth, 30% EBITDA growth and 37% PAT growth, on Rs. 6,809 crore of revenue.

Marico is expected to see 31% PAT growth as easing copra prices lift gross margin by about 290 bps YoY, partly aided by a lower tax rate.

Colgate-Palmolive's PAT is estimated up 21%.

Honasa Consumer's EBITDA is seen up 72% and PAT up 68%, on a low base.

At the other end, ITC, Bikaji Foods and Gopal Snacks are expected to report YoY earnings declines. ITC's revenue is seen up 7% to about Rs. 20,816 crore, but EBITDA is estimated to fall 24% to Rs. 5,094 crore, and adjusted PAT 24% to Rs. 3,846 crore.

For ITC the cigarette business is responsible, where an excise surge is seen cutting net sales and volumes by about 8%, and weaker margins across segments. The brokerage estimates ITC's EBITDA margin at 24.5%, down about 990 bps YoY.

Bikaji Foods is expected to see revenue up 11% but EBITDA down 16%, as a shift in the festive season moves gift pack sales into the third quarter.

Hindustan Unilever is expected to post 11% revenue growth with 6% volume growth, led by home care, while EBITDA rises 7% and PAT 8%.

Britannia is seen with 12% revenue growth, 6% EBITDA growth and about 10% PAT growth, though gross margin should be hit by higher sugar and palmolein prices.

Godrej Consumer is expected to grow revenue 18% and PAT 10%, while Dabur is seen with 11% revenue growth and 9% PAT growth.

Emami's revenue is seen up 20% on a low base, but PAT up only 4% as gross margin slips about 380 bps.

FMCG Stocks Target Price

HSIE has upgraded Nestle India to BUY from ADD, with a target price of Rs. 1,555, about 19% above the October 1 price of Rs. 1,308.

Britannia has received a BUY rating with a Rs/ 6,000 target and Godrej Consumer BUY with Rs. 1,000.

It has also kept BUY on Emami with a TP of Rs. 500, Bikaji with a TP of Rs. 700, Honasa with a TP Rs. 550 and Gopal Snacks with a Target Price Rs. 335. ITC, Marico and Dabur are ADD, with targets of Rs. 300, Rs. 925 and Rs. 425.

HUL and Colgate-Palmolive stay at REDUCE, with targets of Rs. 1,925 and Rs. 1,800 and just 5% and 4% upside, respectively.

Disclaimer: The views and recommendations expressed are solely those of the individual analysts or entities and do not reflect the views of Goodreturns.in or Greynium Information Technologies Private Limited (together referred as "we"). We do not guarantee, endorse or take responsibility for the accuracy, completeness or reliability of any content, nor do we provide any investment advice or solicit the purchase or sale of securities. All information is provided for informational and educational purposes only and should be independently verified from licensed financial advisors before making any investment decisions.