FMCG Stocks Outlook
Nestle India may fall on weak sales, HUL earnings eyed
This story was originally published at 23:20 IST on 18 October 2024
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MUMBAI – Shares of Nestle India Ltd. may decline next week due to disappointing earnings in the September quarter as sales reported by the company were significantly below analysts' expectations. The company announced Thursday that its sales rose a mere 1% on year during the quarter--its lowest sales growth in at least 17 quarters.
The company also faced challenges due to a rise in prices of cocoa and coffee, which affected its margins. Nestle India's raw material costs increased on year after witnessing year-on-year decline in the previous four quarters. "...management partially attributed this sub-par performance to external factors such as muted consumer sentiment, persistent consumer inflation, and curbing purchasing power," HDFC Securities said in a report Friday.
Several brokerages cut their earnings estimates on Nestle to account for weaker-than-expected results during the quarter, leading to some brokerages cutting their target prices as well. Emkay Global Financial Services downgraded the stock to "reduce" from "add" and cut its 12-month target price by 14% to INR 2,400. Among others, ICICI Securities maintained a "hold" rating on the stock but cut the target price by 6% to INR 2,350. "Though we considered upgrading Nestle post stock underperformance of about 20% over last 12 months, we are unable to find any fundamental reasons, as of now," ICICI Securities said in a report post earnings.
Shares of Nestle India witnessed a sharp decline this month in anticipation of weak earnings and the stock has declined over 12% so far this month. The stock has fallen over 4% since the company announced Jul-Sept earnings Thursday, during market hours, and closed at INR 2,350.50 Friday.
Going forward, analysts await earnings of fast-moving consumer goods major Hindustan Unilever Ltd., which is set to report its quarterly earnings Wednesday. The company is expected to report higher volumes compared to a year ago on the back of price cuts taken during the September quarter, according to analysts. However, an increase in prices of key raw materials such as palm oil and tea may have hit profitability and the company may fail to report any growth in net profit during the quarter.
The company's net profit is seen largely unchanged on year at INR 27.08 billion during the quarter, according to an average of estimates from 15 brokerages. Its revenue in the latest quarter may rise 3.4% on year to INR 157.91 billion. Another sectoral major ITC will report its quarterly earnings Thursday.
TOP HEADLINES
* Analyst Concall:Tata Consumer to focus on long-term mkt shr gain over margin
* Earnings Review: Tata Consumer's consol PAT for Jul-Sept beats Street view
* Earnings Outlook: HUL Jul-Sept PAT seen flat on year despite higher volumes
* Earnings Outlook: Volume growth to drive Jul-Sept consol PAT for Britannia
* Earnings Review: Nestle India PAT up 9% on year in Jul-Sept, beats view
* Bikaji Foods arm to invest INR 1.31 bln to buy 53% stake in Hazelnut Factory
* Earnings Outlook: Higher volumes to push Godrej Consumer PAT up 14% on year
* PRESS: Temasek to buy 20-25% stake in Rebel Foods for $180 mln-$200 mln
* Earnings Outlook: United Spirits Jul-Sept PAT seen down 1.7% at INR 3.4 bln
* Earnings Outlook: Cigarette sales seen driving ITC Jul-Sept PAT at INR 51 bln
* HUL files appeal against INR 9.63-bln income tax demand
Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:
| Company | Price | Week-on-week change in % | Resistance | Support |
| Adani Wilmar | 329.00 | (-)2.50 | 337.20 | 318.20 |
| Britannia Industries | 5887.20 | (-)1.50 | 6046.40 | 5790.40 |
| Colgate Palmolive India | 3395.95 | (-)8.00 | 3477.80 | 3308.10 |
| Dabur India | 571.40 | 0.10 | 576.60 | 562.30 |
| Emami | 700.85 | (-)4.00 | 725.60 | 679.70 |
| Godrej Consumer Products | 1336.15 | 1.60 | 1368.70 | 1316.80 |
| Hindustan Unilever | 2717.10 | (-)2.40 | 2763.40 | 2670.30 |
| ITC | 486.70 | (-)0.30 | 498.70 | 472.40 |
| Jyothy Labs | 512.10 | (-)2.90 | 526.70 | 502.40 |
| Marico | 669.30 | (-)2.40 | 685.10 | 646.70 |
| Nestle India | 2350.25 | (-)6.40 | 2410.90 | 2295.80 |
| Procter & Gamble Hygiene and Health Care | 16047.80 | (-)3.50 | 17307.50 | 14881.30 |
| Tata Consumer Products | 1093.25 | (-)1.80 | 1113.90 | 1061.70 |
| Varun Beverages | 588.75 | (-)0.60 | 609.70 | 568.30 |
| Nifty FMCG | 61042.10 | (-)1.70 | 61924.40 | 60012.00 |
| Nifty 50 | 24854.05 | (-)0.40 | 25087.90 | 24450.80 |
| S&P BSE Sensex | 81224.75 | (-)0.20 | 81990.30 | 80026.50 |
End
Reported by Anshul Choudhary
Edited by Tanima Banerjee
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