As the first-quarter business updates from core FMCG companies begin to roll in, a notable trend has emerged—urban consumption is witnessing a gradual recovery while rural demand remains stable. This has reignited investor interest in the FMCG space, with the sector playing a key role in preventing a broader market decline today.
So what are the key takeaways from the business updates so far? Here's a detailed look:
Urban Revival in FMCG Demand
Until now, FMCG companies were seeing a diverging trend between rural and urban markets—urban growth had been muted while rural markets were driving volume expansion. However, this quarter presents a reversal of sorts. Urban volumes have shown signs of picking up, while rural performance has remained consistent with previous trends. This dual strength has boosted sentiment around the FMCG pack in the equity market.
Margin Outlook for H2FY26 Looks Promising
Brokerage reports suggest that margins for core FMCG companies are likely to improve in the second half of the current financial year. This expectation stems from easing raw material prices and operational efficiencies being implemented across the sector.
Company-specific Highlights:
Dabur India
Dabur has reported relatively weaker performance when compared to its peers. Despite an uptick in urban consumption, its consolidated revenue growth remained in the low single digits. EBITDA margins are expected to decline on a year-on-year basis. One of the main challenges for Dabur this quarter has been its summer portfolio.
An early monsoon and a weaker summer impacted beverage and juice sales, dragging down overall performance. Additionally, while other FMCG companies leveraged rural strength, Dabur did not significantly benefit from rural demand this time.
Godrej Consumer Products
In contrast, Godrej Consumer received a more favorable view from brokerages like Nomura. The company's domestic business witnessed mid-single digit volume growth, primarily driven by strong performance in its home care products segment. EBITDA margins are expected to remain in a respectable range of 24% to 26%, with high single-digit value growth anticipated.
Looking ahead, sequential improvements in FY26 are expected, with double-digit EBITDA growth also on the radar.
Conclusion: Sector Shows Resilience Amid Mixed Weather Impact
One major observation from the Q1FY26 updates is the return of urban consumption, which had been lagging behind rural markets in recent quarters. With both rural demand remaining intact and urban areas showing signs of revival, along with potential margin improvements in the second half, the FMCG sector appears to be regaining momentum.
Despite some weather-related setbacks—especially for companies with summer-heavy portfolios—the broader outlook for core FMCG players is turning more optimistic.
Disclaimer:
This article is for informational purposes only and should not be considered as investment advice. Readers are advised to consult with a financial advisor before making any investment decisions.
