FMCG stocks to buy: Axis Securities has identified Nestle India, Asian Paints, Britannia Industries and CCL Products (India) as its top conviction ideas in the FMCG sector following its review of Q1FY27 earnings.
According to Axis Securities, its research team evaluated consumption trends, rural and urban demand, input costs, pricing actions, distribution expansion and competitive intensity to identify companies with strong earnings visibility and the ability to sustain superior returns.
FMCG demand improves
Axis Securities said Q1FY27 marked another quarter of improving consumption momentum, with most FMCG companies reporting high-single to double-digit topline growth.
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Rural and urban demand remained resilient, supported by improving consumer sentiment, premiumisation, deeper distribution and recent GST rate cuts. This was the second consecutive quarter of sequential improvement in demand, although erratic monsoons affected some summer-centric categories, it said.
Company performance
HUL reported 10 per cent underlying sales growth with 5 per cent volume growth, while Dabur reported 10.6 per cent revenue growth and 5 per cent India consumer volume growth.
Colgate-Palmolive grew 12 per cent, CCL Products reported 13.7 per cent revenue growth and Nestle India posted 25.4 per cent topline growth. Britannia grew 9.5 per cent, while VBL reported 20 per cent topline growth.
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In paints, Asian Paints reported 18 per cent year-on-year revenue growth, supported by 9 per cent growth in domestic decorative volumes.
FMCG sector outlook
Axis Securities said it remains constructive on the medium-to-long-term outlook for the FMCG sector, supported by improving consumer purchasing power, low category penetration, increasing rural distribution and continued premiumisation.
The shift towards branded and higher-value products should support revenue growth and margin expansion over the longer term, it said.
Near-term consumption is also expected to improve further, supported by government spending, tax benefits and GST 2.0 reforms. Axis Securities said input-cost inflation could limit near-term margin expansion, while calibrated price increases, cost optimisation and increasing penetration of quick-commerce could support earnings recovery.
Key monitorables
Axis Securities said it will closely monitor key inputs such as crude derivatives, palm oil, packaging materials, milk and sugar, along with the industry’s ability to pass on higher costs without impacting volumes.
Palm oil prices have remained elevated, while sugar prices could remain firm during the festive period, it said.
Urban consumption recovery, rural demand, competitive intensity and the sustainability of recent price hikes will also remain important monitorables. The pace at which companies convert improving demand into volume growth and margin expansion will be critical for earnings upgrades, according to Axis Securities.
Top conviction ideas
Based on its earnings review and sector outlook, Axis Securities identified the following companies as its top conviction ideas:
- Nestle India Ltd. – BUY | Target Price: Rs 1,765* (CMP- Rs 1,465
- Asian Paints Ltd. – BUY | Target Price: Rs 3,270* (CMP: Rs 2,630.80
- Britannia Industries Ltd. – BUY | Target Price: Rs 6,590* (CMP: Rs 5,453
- CCL Products (India) Ltd. – BUY | Target Price: Rs 1,425* (CMP: Rs 1,124.60
*Target prices are based on Axis Securities’ Q1FY27 Result Update Reports.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
