Top FMCG sector stocks to watch out for in 2024

Fast-moving consumer goods (FMCG) stocks have seen a drop in value so far in 2024. Rising input cost, inflation and interest rate worries have cast a shadow on the FMCG shares this year.

The sectoral Nifty FMCG index has declined more than 5% in 2024 so far and figures among the worst performers. Similarly, the BSE FMCG index has also declined nearly 6%. However, both Nifty FMCG and BSE FMCG indices have gained nearly 20% in the last one year.

According to reports, increased raw material costs also pose a challenge for the FMCG sector. This could lead to sluggish growth and reduced margins. Despite the challenging environment for the sector, there are some FMCG shares that bucked the market trend or hold some potential in the rest of the year.

Here is the list of top five FMCG stocks to watch out for in 2024.

Colgate-Palmolive (India) Ltd

Colgate-Palmolive India Ltd which manufactures personal care goods such as toothpaste, toothbrushes, and mouthwash, has risen around 9% in 2024 so far. The stock has beaten the sectoral index in returns so far.

Colgate-Palmolive has shown strong pricing power and input cost deflation. The growth led by pricing power is expected to drive earning per share expansion in future. The FMCG company reported a 35.71% increase in the December quarter net profit to ₹330.11 crore while revenue from operations rose by 8.21% to ₹1,386.41 crore.

ITC

The hotels-to-cigarette conglomerate ITC’s stock price has displayed a remarkable recovery of over 7% in the past month from its early losses in 2024 so far. While the stock is down nearly 8% so far in 2024, the recent correction allows buying ITC as it offers an attractive multiple. Though the company's cigarette volumes are expected to remain muted, premiumisation in the segment is positive for the company. Its FMCG business is expected to be a key driver for growth.

Nestle India

Nestle India, a subsidiary of the world’s leading food and beverage company Nestle, has seen around 9% growth in India sales in the December quarter. The growth was led by pricing strategy and momentum in e-commerce and out-of-home channels. In the calendar year 2023, it reported a little over 13% growth in sales. The company which sells products under Nescafe, Maggi, KitKat, and Bar One brands, among others, has risen over 33% in the past year. While it was down over 3% in 2024 so far.

Procter & Gamble Hygiene & Health Care

Procter & Gamble Hygiene & Health Care, which owns brands such Vicks and feminine care product Whisper, has gained around 7% in the past month against its year-to-date losses of 3%. The stock has given returns of 26% in the past year.

While the company reported flat sales at ₹1,133.43 crore for the December quarter, the company reported 10% growth in profit on better cost management.

Britannia Industries

Leading biscuits and cake maker Britannia Industries has recovered from its Y-T-D losses. The company reported a 1.42% growth in revenue to ₹4,256.3 crore for the December quarter while the EBITDA margins stood at 19.3% in the quarter. The company has given returns of around 14.5% in the past year.

The biscuit maker’s management looks to execute pricing action to remain competitive. It is also looking to reinvest accrued benefits in ad-spends and promotions.

FMCG shares like HUL, Dabur India and GCPL have given year-to-date negative returns in 2024 due to overall correction and inflation concerns. However, attractive valuation and reasonable growth visibility make a case for these fast-moving consumer goods stocks. Efficient supply chains, sustainability trends, adaptability to digital and diversified products range will make a difference for FMCG shares in the rest of 2024.