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Remain selective in FMCG; ITC, USL, Radico, GPCL, Dabur top picks: HDFC Securities

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Varun Lohchab, Head-Institutional Research at HDFC Securities expects Q2FY22 to be a muted one for fast moving consumer goods (FMCG) sector.

Varun Lohchab, Head-Institutional Research at HDFC Securities expects Q2FY22 to be a muted one for fast moving consumer goods (FMCG) sector.
“In terms of FMCG, this quarter is going to be a muted one from the perspective of profit and EBITDA growth,” he said.
“We have not been overly bullish on this segment. We have been quite selective. ITC, United Spirits, Radico Khaitan, Godrej Consumer Products (GPCL) and Dabur India have been our top picks. Overall FMCG, Q2 and perhaps even Q3 doesn’t look like a very rosy picture,” he said.
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According to him, the bigger worry is the raw material inflation, which will hit most of these companies especially the typical FMCG ones and not the discretionary ones.
“Earlier we were all expecting that in the second half, the margin trajectory will start to look better because the raw materials will start coming into the base but given this recent upmove in crude from $75 per barrel to $85 per barrel, it looks like that even the second-half margin recovery thesis is under question now,” he explained.
In terms of staples, there is no big pent-up demand. Last year, there was a step up in growth rate because of pantry loading, which has helped Q1 and Q2 numbers, there is absence of that this time around. So, while topline, there is a sequential improvement, it is not a very significant improvement in terms of topline trajectory, he noted.
For the full interview, watch the accompanying video.
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