Best FMCG Stocks to Buy

Best FMCG stocks to buy

by 5paisa Research Team Last Updated: Sep 07, 2023 - 05:09 pm 26.3k Views

In India, household and personal care items make for fifty percent of FMCG sales. Increasing awareness, improved accessibility, and lifestyle changes have spurred expansion. The urban segment generates approximately 55% of the total income of the FMCG industry in India. In recent years, the FMCG market in rural India has expanded faster than in urban India. 50% of rural expenditure in rural and semi-rural areas is spent on fast-moving consumer goods (FMCG).

According to IBEF, the FMCG market in India is expected to increase at a CAGR of 14.9% to reach USD 220 billion by 2025, from USD 110 billion in 2020. The Indian packaged food market is expected to double to USD 70 billion by 2025. Rising digital connectivity in cities and rural areas is driving the demand for FMCG (through e-commerce portals).

Therefore, it makes perfect sense to participate in the growth of the FMCG industry by investing in this sector. We have listed 5 FMCG companies with strong fundamentals and while selecting these stocks, we considered the following factors: 

a) Market Capitalisation should be a minimum of Rs.40,000 crore
b) Operating Margin (OPM) > 20%
c) Return on capital employed (ROCE) > 20%

5 FMCG Stocks to Buy 

1) Hindustan Unilever

Market Cap: Rs.501308.75 Cr
OPM: 24.51%
ROCE: 24.35%

About the company: Hindustan Unilever Limited (HUL) is India’s largest fast-moving consumer goods company. With 50+ brands spanning in various categories its portfolio includes leading household brands such as Lux, Lifebuoy, Surf Excel, Rin, Wheel, Glow & Lovely, Pond’s, Vaseline, Lakmé, Dove, Clinic Plus, Sunsilk, Pepsodent, Closeup, Axe, Simple, Love Beauty Planet, TRESemmé, Brooke Bond, Bru, Knorr, Kissan, Kwality Wall’s, Horlicks and Pureit.

2) Procter & Gamble Hygiene and Health Care Limited 

Market Cap: Rs.42761.67 Cr
OPM: 21.42%
ROCE: 93.78%

About the company: Procter & Gamble Hygiene and Health Care Limited is engaged in the manufacturing and selling of branded packaged fast-moving consumer goods in the femcare and healthcare businesses. Its portfolio includes WHISPER – India’s leading Feminine Hygiene brand,  VICKS – India’s No. 1 Health Care brand and Old Spice.

3) Dabur India

Market Cap: Rs.86407.25 Cr
OPM: 20.68%
ROCE: 27.21%

About the company: Dabur India Limited is the fourth largest FMCG Company in India and the world’s largest Ayurvedic and Natural Health Care Company with a portfolio of over 250 Herbal/Ayurvedic products. Dabur's FMCG portfolio includes nine Power Brands namely, Dabur Chyawanprash, Dabur Honey, Dabur Honitus, Dabur Pudin Hara, and Dabur Lal Tail in the Healthcare space; Dabur Amla, Dabur Red Paste, and Vatika in the Personal care space; and Réal in the Foods category.

4) Nestle India

Market Cap: Rs.161785.58 Cr
OPM: 23.78%
ROCE: 147.06% 

About the company: Nestle India Limited is a subsidiary of Nestle which is a Swiss MNC. The company operates in the Food segment. Nestle India manufactures products of truly international quality under internationally famous brand names such as Nescafe, Maggi, Milky bar, Nestea, etc. and in recent years the Company has also introduced products of daily consumption and use such as NestleMilk, Nestle slim Milk, Nestle Dahi, etc.

5) Colgate Palmolive (India)

Market Cap: Rs.40259.25 Cr
OPM: 30.71%
ROCE: 92.03%

About the company: Colgate-Palmolive India Ltd is engaged in the manufacturing/ trading of toothpaste, tooth powder, toothbrush, mouthwash, and personal care products. The company's product portfolio includes various SKUs of toothpaste, tooth powder, toothbrush, mouthwash, and personal care products. The company has ~51% market share in the toothpaste segment, 48% in toothpowder, and ~30% share in the toothbrush segment. It has maintained its leadership since the 1990s.

The FMCG industry has changed dramatically in the past two decades and is now India's fourth-largest sector in India. Digitization, direct sales to customers, and increasing government efforts and investment will impact the sector's growth and development in FY23.

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