FMCG stocks decline post March quarter earnings; Dabur hits new 52-week low, brokerages see up to 24% upside

FMCG stocks in focus: Amid inflation worries, stocks of most of the fast-moving consumer goods (FMCG) companies declined up to 9 per cent on the BSE in the last few sessions after they declared their March quarter results recently. Most of these stocks are trading flat with a positive bias on Tuesday, while Dabur hit a new 52-week low. 

On the back of multiple factors including both domestic and international, the input cost concerns for the FMCG companies persists. Marico, Dabur, Tata Consumer, Britannia, and Hindustan Unilever among others have reported stable or marginal growth in volumes during March quarter earnings. 

However, the market analyst and TradeSwift Director Sandeep Jain said, “These stocks are reacting to margin pressure that occurred sequentially due to high raw material costs, however, the results of each of these companies have been either stable or in-line with estimates year-on-year (YoY).”  

The analyst also blamed the overall sell-off in the market for the declines in these defensive stocks. 

Individually slumping for the fifth straight session on Tuesday, Dabur shares have touched a new 52-week low of Rs 499.35 per share. It has declined by over 8 per cent in the last five sessions on the BSE, followed by Tata Consumers down over 7.5 per cent in the last five sessions. 

While Marico and Britannia have slipped nearly 5 and 3.5 per cent in the last five sessions on the BSE, HUL reported a meager dip of almost 1 per cent during the same period. 

Considering the inflation pressure being the time frame, YES Securities maintained a Buy stance for Marico, Dabur and Tata Consumer for a price target of Rs 603, Rs 529, and Rs 847 per share, respectively, implying an upside of up to 24 per cent from Monday’s closing price. 

Being optimistic about the defensive sector, HDFC Securities in its report said, “In comparison to other sectors, the FMCG sector has historically been more resilient to external challenges, leading to strong earnings (12.5% CAGR) and valuation rerating (2x) in the last two decades.”