The consumer sector is poised for a strong start to FY27, with healthy revenue growth expected in the June quarter on the back of premiumisation, price-led growth, GST rate cuts and expanding distribution channels, according to Anand Rathi Research, which conducted extensive channel checks with dealers, distributors and industry participants across the FMCG, paints and alcoholic beverages segments.
While El Niño-related weather risks could weigh on rural demand, the brokerage expects steady volume growth, complemented by moderate price increases. It also believes the recent decline in crude oil and crude derivative prices is likely to support margin expansion over the coming quarters. Among its preferred large-cap picks are Marico, Godrej Consumer Products (GCPL) and Hindustan Unilever (HUL), while Mrs. Bector Foods and Zydus Wellness remain its preferred mid- and small-cap ideas.
Price hikes, premiumisation to drive FMCG growth
According to Anand Rathi, the FMCG sector maintained steady revenue growth during the June quarter despite some weakness in the general trade channel. Recent price hikes, coupled with robust growth in e-commerce and modern trade, are expected to further accelerate revenue growth in Q1 and the first half of FY27.
The brokerage expects the double-digit revenue growth witnessed over the past two quarters to sustain, aided by premium products, innovation and GST rate reductions in select categories. Lower crude prices are also expected to provide meaningful relief on input costs, supporting margins from Q2FY27 onwards.
Paints, alco-beverage segments remain resilient
The brokerage’s channel checks indicate that the paints and alcoholic beverages segments also delivered healthy double-digit growth during the quarter.
Paint demand remained resilient despite multiple price hikes, including a further 4% increase in June, supported by strong repainting activity and an extended summer season. In the alcoholic beverages segment, premium products continued to outperform even as demand for mass-market offerings remained subdued. Anand Rathi also noted that ITC’s cigarette portfolio has remained resilient despite phased price increases.
Valuations attractive despite recent correction
Anand Rathi believes the recent correction in FMCG and consumer stocks, driven by higher input costs and supply-chain disruptions linked to weaker exports to West Asia, has created attractive valuation opportunities.
The brokerage expects companies under its coverage universe to deliver nearly 10% revenue CAGR and 14% earnings CAGR over FY26-FY28, marking a sharp improvement from the subdued earnings growth seen in FY25 and FY26. It believes improving growth prospects and easing cost pressures could support further re-rating across the sector.
Top stock picks
Anand Rathi’s preferred picks include:
Large-cap FMCG: Hindustan Unilever (Target Price: ₹2,700), Marico ( ₹865), Godrej Consumer Products ( ₹1,400)
Mid-cap FMCG: Mrs. Bector Foods ( ₹250)
Consumer discretionary: Restaurant Brands Asia ( ₹93)
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
