FMCG sector in focus: The latest analysis of monthly product Maximum Retail Prices (MRP) across 14 fast moving consumer goods (FMCG) categories reveals a trend of incremental price hikes, with toothpaste emerging as a frontrunner, analysts at brokerage firm Emkay said. 

While soap, edible oil, and biscuits saw negative pricing adjustments, other categories witnessed gradual increases. 

Inflation-driven pressures are prompting FMCG companies to consider inflation-linked price hikes for financial year 2025 (FY25), the Mumbai-based brokerage said. 

Notably, toothpaste, hair oil, detergents, shampoo, milk products, health food drinks, tea, and coffee are among the categories witnessing these incremental price adjustments.

Amid a muted demand outlook, FMCG companies are exploring avenues to boost topline growth through pricing strategies. 

Contrary to past practices of passing on raw-material benefits through price cuts, companies are now aiming for price growth aligned with inflation, a move expected to support margin expansion and double-digit earnings momentum. 

While rational competition remains crucial, regional competitive pressures are anticipated to ease with large players operating based on spot raw-material prices, Emkay highlighted in a note.

The sector's valuation dynamics have undergone a correction, with most companies aligning with their historical Price earnings ratios (P/E ratios). 

Brokerage firm further said that despite subdued demand, companies are expected to focus on margin expansion to sustain earnings growth, potentially supporting valuations. 

Dabur and ITC are favoured picks due to execution prowess and favourable valuations, while Colgate has a sell recommendation due to valuation concerns, Emkay added.