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Godrej Consumer has warned investors that its standalone sales growth and profitability may be negatively impacted by challenging business conditions. This announcement follows a trend in the FMCG sector, where companies like Dabur India have also reported issues such as inventory pile-ups, leading to declining sales. As a result, shares of Godrej Consumer and other FMCG stocks have seen a downturn.
FMCG stocks faced a significant selloff on December 9, driven by concerns over a demand slowdown following a weak quarterly update from Godrej Consumer Products. Hindustan Unilever saw its worst decline in six weeks, dropping 4%, while Godrej plunged over 9%. The Nifty FMCG index fell over 2%, marking it as the worst performing sectoral index of the day.
The Q2 earnings season for FY25 is underway, with major companies like Apollo Hospitals, Kansai Nerolac Paints, and Trident set to release their results. While many firms have reported, the overall corporate earnings scorecard has been weak, with only 62% meeting or exceeding profit expectations, particularly in the consumption sector. Notably, GAIL's earnings missed expectations due to lower gas trading margins, while Power Grid's profit remained flat year-on-year.
Indian benchmark indices continued their decline for the second consecutive day, with Nifty down 135 points to 24,205 and Sensex falling 553 points to 79,389, marking the worst month since March 2020 amid heavy FII outflows and disappointing Q2 earnings.Cipla's shares surged 10% following a positive FDA classification for its Goa facility, allowing the launch of its chemotherapy drug Abraxane. In contrast, IRB Infrastructure Developers saw a drop in shares due to subdued earnings, despite a slight increase in net profit, while Dabur India reported a 17% year-on-year decline in net profit for Q2FY25.
Prabhudas Lilladher has issued a hold rating on Dabur India with a target price of Rs 589, citing in-line performance amid rural growth outpacing urban demand, impacted by food inflation and adverse weather. The company’s acquisition of Sesa Care aims to enhance its premium hair care segment, though growth is expected to be gradual. Dabur anticipates mid to high single-digit growth in the second half of FY25, with a projected 12.4% PAT CAGR over FY25-27.
Dabur India reported disappointing Q2FY25 results due to weather-related challenges and inventory corrections, leading to a decline in the India business. However, rural growth continues to outperform urban demand, and there are positive trends in international business, alongside potential benefits from the merger with Sesa Care. Despite the soft quarter, the medium-term outlook remains optimistic as urban demand is expected to recover once food inflation stabilizes.
Dabur India reported a 17% decline in Q2 net profit, falling to Rs 425 crore, while revenue dropped 5% to Rs 3,029 crore, aligning with market expectations. Following the earnings announcement, shares fell over 2% to Rs 533, prompting CLSA to maintain a 'hold' rating with a target price of Rs 582 per share.
Analysts are optimistic about Larsen & Toubro, with Bernstein issuing an Outperform call and a target price of ₹3,891 per share, citing strong execution and a solid working capital position. Nomura also supports L&T with a Buy call and a target of ₹4,100, highlighting a significant order inflow growth guidance for FY25. In contrast, CLSA has issued a 'Hold' rating on Dabur India.
In a volatile session on October 30, Indian benchmark indices closed lower, with the Nifty falling below 24,350 and the Sensex down 427 points. Selling pressure was evident in banking, metal, and IT sectors, while FMCG, capital goods, and media stocks saw gains of 0.5-2 percent. The Sensex ended at 79,942.18, down 426.85 points or 0.53 percent, and the Nifty closed at 24,340.85, down 126 points or 0.51 percent.
Dabur India reported a 17% decline in Q2 net profit to Rs 425 crore, aligning with market expectations, while revenue fell 5% to Rs 3,029 crore. The company also announced a Rs 2.75 dividend and plans to acquire Sesa Care to enhance its presence in the Rs 900 crore Ayurvedic hair oil market. Despite a 3.5% rise in share price over the past year, Dabur has underperformed compared to the Nifty 50 index, which has increased by over 27%.
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