FMCG companies have reported muted performance in the third quarter of FY25 due to weakness in the urban market owing to increased competitive intensity and subdued demand environment. However, rural recovery continues to grow faster owing to easing inflation, increased government spending, and higher MSP.
Companies have highlighted that volume growth is (especially in staples) likely to remain under pressure for the next 1-2 quarters and pick-up expected only from Q1FY26. On the Gross margins front, most companies reported subdued performance due to higher key raw material prices such as agri commodities.
FMCG Sector Outlook
Axis Securities believes that the FMCG companies are on a structural growth path, with several categories still under-penetrated and underserved. Increasing rural penetration further strengthens the sector’s growth potential.
With rising purchasing power, Indian consumers are increasingly opting for premium and branded products. This premiumisation trend is expected to be a key growth driver for the FMCG sector. In a volatile, uncertain, complex, and ambiguous (VUCA) environment, the FMCG sector stands out for delivering best-in-class return ratios such as ROCE, ROE, and dividend yield, ensuring long-term capital protection, Axis Securities said.
Stocks To Buy
The brokerage firm recommends two FMCG stocks to buy after Q3 results as its top conviction ideas in the sector. These FMCG stocks to buy are Varun Beverages and DOMS Industries.
Varun Beverages | Buy | Target Price: ₹710
Varun Beverages has consistently outperformed its peers in recent quarters despite a volatile environment. The company is expected to sustain its strong growth momentum and the strategic initiatives are set to drive long-term growth and profitability, Axis Securities said.
It has a ‘buy’ call on Varun Beverages shares with a target price of ₹710 per share. Axis Securities remains positive on the stock’s long-term prospects and recommends ‘buy on dips’.
DOMS Industries | Buy | Target Price: ₹3,080
DOMS Industries has been executing strategic initiatives over the past few years, which are expected to drive growth in the coming years, said the brokerage firm. It has a ‘Buy’ rating on DOMS Industries stock with a target price of ₹3,080 per share.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
