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A report by Emkay Global Financial Services on Friday said that the corporate commentary on the Fast-Moving Consumer Goods (FMCG) sector has highlighted the muted demand setting prevailing in Q4FY24, which has been projected by data agencies for CY24.

“Nielsen, which tracks retail data, is building a case of 4.5 - 6.5 per cent value growth for the sector. Kantar, which tracks household consumption data, echoed the same muted outlook,” the report said.

It said that with the El-Nino effect remaining till May 2024 (agri growth is projected at 1.8 per cent in FY24; a seven-year low), and expectation of no material shift in consumption from elections (as in the past), demand outlook remains weak for 1HFY25.

The report added that the demand is likely to see recovery from 2HFY25 and as per consensus estimates, for large and traditional listed companies, the revenue growth is likely to be in high single to low-double digits, which is factoring demand recovery ahead.

“We see an extended winter as unlikely to aid in primary sales, similarly, summer placement has been delayed, affecting Q4FY24 growth,” the report added.

“Sector valuations have seen de-rating, amid distressed demand setting and surge in competitive intensity in the value segment; though it still maintains a premium to a broader market index, given the promising sector outlook and fundamentals,” it said

It said that the FMCG sector is poised for mid-single-digit growth in CY24, driven largely by volume, as per estimates of Nielsen IQ and Kantar.

“Demand setting is likely to remain muted in 1HFY25 and expected to recover gradually in 2HFY25, as the effects of El Nino subsides,” the report added.