Summary of the Conference Call on FMCG Sector Industry Overview - The conference call focused on the Fast-Moving Consumer Goods (FMCG) sector in India, discussing the revival of mass consumption and its implications for stock performance and earnings growth potential [1][2]. Key Concerns and Insights Concern 1: Recovery in FMCG Sector Growth - There is a strong recovery in underlying volume growth for the FMCG sector, with 1QFY26 aggregate volume growth accelerating by approximately 100 basis points year-over-year, while aggregate pricing growth was around 3% year-over-year [2]. - The volume growth is broad-based, except for aerated beverages, which were affected by a weak summer [2]. - Management commentary indicates further improvement in volume growth in July and August, driven by a recovery in mass urban consumption [2]. Concern 2: Sustainability of Recovery - Skepticism exists due to the sector's inconsistent performance over the past 4-5 years, characterized by brief growth spurts [3]. - However, several clear tailwinds for consumption revival are identified: 1. Sharp moderation in food inflation leading to real wage growth 2. Government stimulus through income tax cuts and GST rate cuts 3. Strong agricultural production cycle 4. Easing interest rates - Anticipated future GST rate cuts and the complete effects of interest rate transmission are expected to further boost consumption [3]. - The upcoming pay commission within 18 months is viewed as a significant catalyst for sustained consumption growth over the next 12-18 months [3]. Concern 3: Stock Performance and EPS Growth - Investor concerns regarding FMCG stocks are linked to significant EPS cuts and low growth over the past two years, alongside increasing competition from regional and digital-first brands [6]. - It is expected that most FMCG companies will achieve double-digit EPS growth in 2HFY26 and FY27, driven by: 1. Accelerated growth leading to operating leverage 2. Easing input costs for key commodities like palm oil, tea, and copra [6]. - Heightened competition has led to consumers downtrading to cheaper brands, but improving macroeconomic conditions are anticipated to reverse this trend [6]. Notable Stocks Discussed - **Hindustan Unilever (HUL)**: Debated due to management changes and the path to double-digit EPS growth amid increased competition [7]. - **Marico**: Investors appreciate its consistent growth and margin resilience [7]. - **Godrej Consumer Products Limited (GCPL)**: Positive growth outlook but concerns over margins due to rising palm oil prices [7]. - **Tata Consumer Products**: Discussions centered on the slowdown in high-growth segments and potential structural concerns [7]. - **Varun Beverages**: Focused on the impact of competitive intensity in aerated beverages and growth potential in energy drinks [7]. - **Consumer Discretionary Names**: Increased interest in Titan, Jubilant Foodworks, Avenue Supermarts, and Trent due to lower valuations and mid-teens growth profile [8]. Additional Insights - The report emphasizes the importance of considering multiple factors in investment decisions, highlighting potential conflicts of interest due to Goldman Sachs' business relationships with covered companies [4]. - The report also includes a detailed analysis of EPS revisions for various FMCG stocks, indicating significant downgrades in FY24 and FY25 [11]. This summary encapsulates the key points discussed during the conference call, providing insights into the FMCG sector's recovery, sustainability, and stock performance outlook.