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India’s fast moving consumer goods (FMCG) companies are expected to report strong December quarter earnings aided by festive sales, improved consumer sentiment, better mobility, and a severe winter that led to people spending beyond staples and cleaning products.

In what may be a turning point for FMCG firms, they could see the strongest top-line growth rate in seven quarters, analysts at Motilal Oswal Institutional Equities said in a 14 January note. “Top-line growth momentum has well and truly returned post the pandemic impact in previous quarters, with cumulative sales for our coverage universe expected to grow 8.5% year-on-year (y-o-y) for 3QFY21. This is the strongest pace of growth estimated since the March 2019 quarter."

Edelweiss Securities estimates revenues at large consumer goods companies to grow 8.2%, with profit after tax (PAT) growing 4.4% y-o-y in the third quarter of the current fiscal year. In Q2FY21 it had projected a 6.4% jump in quarterly revenues with PAT down 3.7%.

Sectoral analysts also remained bullish on growth prospects in the December quarter on the back of sustained sales momentum in rural and a recovery in discretionary categories, along with improved consumer sentiment and spends because of pent-up demand.

India witnessed the world’s harshest lockdown as covid cases surged early last year. This led to a severe disruption in demand and tilted the scales in favour of packaged food makers, and health and hygiene products. Meanwhile, discretionary items, such as beauty products and out-of-home consumption products such as beverages and ice-creams reported a slump in demand.

Researcher Nielsen expects the country’s FMCG market to report a 1-3% decline in full year sales. In its earlier forecast, Nielsen had said FMCG sales returned to 1.6% y-o-y growth in the September quarter, after 19% contraction in the preceding three months of 2020. Nielsen follows a calendar year.

ICICI Securities is estimating sharper growth in third quarter sales with 12.1% revenue growth. However, gross margins for most companies could be under pressure, with rising prices of crude and a few agriculture commodities. Companies are initiating price hikes, selectively.

Discretionary categories could finally see some respite in demand. Analysts at Edelweiss said that with the lockdown restrictions easing, discretionary categories such as hair oil, skin care, hair colour, and juices are beginning to revive. “We expect Emami, Marico, paint companies, and Dabur to report double- digit volume growth y-o-y. HUL’s GSK business and skin care would see good recovery," it said. Sales of sanitizers and cookies, on the other hand, could cool off after seeing heightened demand in the first six months of the year.

Marico Ltd said in its quarterly update on 4 January that its India business delivered a strong performance with double-digit volume growth. “Parachute coconut oil delivered ahead of its medium-term aspiration. Saffola edible oils continued its growth momentum, delivering double-digit volume growth… There was a steady revival in discretionary categories with the premium personal care portfolios witnessing improving trends sequentially, but still posting a modest decline on a y-o-y basis," it added.

Meanwhile, TV advertising grew in the second half of the year. Hindustan Unilever was the biggest advertiser with 30% growth in volumes over 2019, followed by Reckitt Benckiser Group, with its ad volumes growing by 37% in 2020 over the year-ago, according to data from television monitoring agency Broadcast Audience Research Council released earlier this month.

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