Emkay Bullish on FMCG Sector

Domestic brokerage firm Emkay Global is betting big on the fast-moving consumer goods (FMCG) sector, fueled by an anticipated rural revival in India. With an improving monsoon season and the Union Budget's potential pro-consumption initiatives, Emkay sees tailwinds ahead for FMCG giants like Hindustan Unilever (HUL), Dabur India, Bikaji Foods, and Honasa Consumer.

Rural Resurgence Spurs Consumption

The rural economy, a significant driver of FMCG consumption, is poised for a comeback. An expected favourable monsoon season could boost agricultural incomes, unlocking pent-up demand in these regions. Coupled with the government's likely policy shift towards pro-consumption measures, the stage is set for a resurgence in rural spending.

Emkay's FMCG Favorites

Riding the rural recovery wave, Emkay has identified several FMCG stocks as prime beneficiaries:

Hindustan Unilever (HUL): Emkay has upgraded its rating on HUL from 'Add' to 'Buy', with a target price of ₹2,900 per share. As a diversified FMCG giant, HUL is well-positioned to capitalise on the rural upswing.

Dabur India: Known for its seasonal product portfolio, Dabur is expected to outperform as rural demand picks up. The brokerage anticipates better performance from Dabur, Emami, and GCPL, backed by their seasonal offerings.

Bikaji Foods: A rising star in the packaged food segment, Bikaji Foods could benefit from the rural consumption revival.
Honasa Consumer: Another contender in Emkay's FMCG picks, Honasa Consumer's fortunes could shine as rural India bounces back.

Sectoral Tailwinds Converge

Emkay says the FMCG sector has been navigating a "slow and volatile lane" due to controlled populist measures and macroeconomic headwinds. However, with inflation cooling down and consumption expected to revive, the brokerage anticipates high-single-digit growth for the sector in FY25.

Emkay believes that the convergence of tailwinds, including improved execution by FMCG companies, could trigger a valuation re-rating for the sector. The Union Budget's potential consumption-boosting measures could further fuel this optimism in the near term.

As rural India finds its footing and the government pivots towards pro-consumption policies, the FMCG sector is poised for a renaissance. With Emkay's bullish outlook, investors may find compelling opportunities in HUL, Dabur, Bikaji Foods, and Honasa Consumer, among others, to tap into this emerging consumption story.