Undervalued FMCG

Stocks in India
High Profit, Low Debt Opportunities
Near 52-Week Lows
Analysis Date: May 2025

FMCG Sector in
India: Overview
The Indian Fast-Moving Consumer
Goods (FMCG) industry is experiencing
continuous expansion, driven by
consumer growth and higher product
prices, particularly for essential goods.
The sector plays a crucial role in the
Indian economy, providing
employment to around 3 million
people and accounting for
approximately 5% of total factory
employment.

Growth in this sector is fueled by

favorable government initiatives and
policies, an expanding rural market, a
youthful population, new branded
products, and the rise of e-commerce
platforms. To create long-term value,
companies in this sector are focusing
on resilience across manufacturing
processes, operations, retail and
logistics channels, consumer insights,
and communication strategies.

While the sector has experienced

significant recent growth, not all
company share prices have reflected
this growth, creating potential
investment opportunities in
undervalued stocks.

Investment Selection Criteria

High Profitability
Companies with net profit margins
above or near 15%, indicating
strong business fundamentals and
pricing power.

Low Debt
Low debt-to-equity ratios,
reducing financial risk and
providing flexibility for future
growth opportunities.

Near 52-Week Lows

Trading significantly below their
52-week highs, providing potential
entry points for value investors.

Growth Potential
Strong growth catalysts, expansion
plans, or market opportunities that
could drive future performance.

Selected Undervalued
FMCG Stocks
Net
Current Debt/Eq
Company Profit
Price Ratio
Margin

Mishtann
₹14.45 22.60% Low
Foods

Vadilal
₹4,046.00 16.60% 0.36
Industries

Gopal
₹271.40 6.80% 0.17
Snacks

Dabur
₹462.75 13.80% 0.04
India

Colgate-
₹2,740 21.62% Low
Palmolive

Detailed Stock Analysis

Mishtann Foods Ltd

High ROE: 98.7% Low P/E: 4.50

Company Profile
Mishtann Foods Ltd is a small-cap
FMCG company with a market
capitalization of Rs.1,568 crore. The
company has shown strong financial
performance with a 30% year-on-year
growth in revenue for Q1 FY25, totaling
Rs.383 crore, and a 3% increase in net
profit to Rs.71 crore.
The company stands out with its
exceptional ROE of 98.7% and ROCE of
88.7%, which are significantly higher
than industry averages. Trading at a P/E
ratio of just 4.50 compared to the
industry average of 42.0, the stock
appears significantly undervalued.

Investment Thesis
Significantly undervalued with P/E of
4.50 vs. industry average of 42.0
Exceptional ROE of 98.7% indicates
highly efficient use of equity
Strong revenue growth of 30% year-
on-year
Net profit margin of 22.6%, well
above the 15% threshold
Trading near its 52-week low,
providing a potentially attractive
entry point

Market Cap
₹1,568 Cr

Current Price
₹14.45

Net Profit Margin

22.60%

P/E Ratio
4.50
Industry Avg: 42.0

ROE
98.7%

Risks & Considerations

Small-cap stocks typically carry
higher volatility and liquidity risks
Exceptionally high ROE should be
investigated for sustainability
The company has high debtors of
168 days, which could impact cash
flow
Tax rate appears lower than industry
average, which may not be
sustainable

Vadilal Industries Ltd

Strong ROE: 31.0% Low Debt: 0.36 D/E

Company Profile
Vadilal Industries Ltd is an established
player in the ice cream and frozen
dessert segment with a market
capitalization of Rs.2,791 crore. The
company has demonstrated consistent
financial performance with a 13% year-
on-year increase in revenue for Q1
FY25, reaching Rs.464 crore, and an
8.5% growth in net profit to Rs.77
crore.

With a ROE of 31.0% and ROCE of

27.1%, Vadilal Industries demonstrates
efficient capital utilization. The
company's low debt-to-equity ratio of
0.36 indicates financial prudence and
stability. Trading at a P/E ratio of 18.3
compared to the industry average of
42.0, the stock appears undervalued.

Investment Thesis
Attractive valuation with P/E of 18.3
vs. industry average of 42.0
Strong ROE of 31.0% showing
efficient use of shareholder capital
Low debt-to-equity ratio of 0.36,
indicating financial stability
Consistent revenue growth (13%
YoY) with improving profit margins
Trading around 15% below recent
peak, offering a reasonable entry
point

Market Cap
₹2,791 Cr

Current Price
₹4,046.00

Net Profit Margin

16.60%

Debt/Equity Ratio
0.36

ROE
31.0%

Risks & Considerations

Seasonal business with potential
variability in quarterly results
Increasing competition in the
premium ice cream segment
Raw material price fluctuations may
impact margins
Energy costs are significant in this
business and subject to volatility

Gopal Snacks Ltd

Near 52-Week Very Low Debt: 0.17
Low D/E

Company Profile
Gopal Snacks Ltd is a player in India's
growing snacks market with a market
capitalization of Rs.5,324 crore. The
company has shown moderate revenue
growth of 11.3% year-on-year for Q1
FY25, reaching Rs.354 crore, though net
profit decreased by 14% to Rs.24 crore.
With a ROE of 29.2% and ROCE of
32.0%, Gopal Snacks demonstrates
strong operational efficiency. The
company's extremely low debt-to-
equity ratio of 0.17 (or 1.3%) indicates
an almost debt-free balance sheet,
providing significant financial flexibility.
The stock is currently trading just
6.06% above its 52-week low,
potentially offering a value
opportunity.

Investment Thesis
Almost debt-free with a debt-to-
equity ratio of only 0.17
Strong ROE of 29.2% and ROCE of
32.0% indicating operational
efficiency
Trading close to 52-week low,
providing a potential value
opportunity
Positioned in the growing packaged
snacks market in India
High credit rating from CRISIL
(upgraded to 'CRISIL A/Stable/CRISIL
A1')

Market Cap
₹5,324 Cr

Current Price
₹271.40

Net Profit Margin

6.80%

Debt/Equity Ratio
0.17

% Above 52-Week Low

6.06%

Risks & Considerations

Higher P/E ratio of 55.7 compared to
industry average of 42.0
Recent decline in net profit (down
14%) is a concern
Net profit margin of 6.8% is below
our target threshold of 15%
Intense competition in the snacks
category from both organized and
unorganized players
Raw material price fluctuations
could impact margins

Dabur India Ltd

23% Below Peak Very Low Debt: 0.04 D/E

Company Profile
Dabur India is a major FMCG player
with a history spanning over 139 years,
specializing in Ayurvedic medicines and
natural products. The company has a
multinational presence in more than
120 countries with a diverse product
portfolio.

The company's recent financial

performance has been challenging,
with a 5.5% year-on-year decline in
revenue to Rs.30.3 billion and an 18%
YoY decline in net profit to Rs.4.2 billion
for Q2 FY25. Despite these challenges,
Dabur maintains an extremely low
debt-to-equity ratio of just 0.04,
indicating robust financial health. The
stock is currently trading at Rs.462.75,
which is 23% below its 52-week high of
Rs.672.

Investment Thesis
Minimal financial risk with debt-to-
equity ratio of just 0.04
Trading 23% below 52-week high,
creating a potential value
opportunity
Strong brand recognition and
established distribution network
Growth potential in the natural and
Ayurvedic products segment
Management optimistic about
recovering urban demand
Committed to investing in brands
and enhancing distribution
capabilities

Current Price
₹462.75

Net Profit Margin

13.80%

Debt/Equity Ratio
0.04

% Below 52-Week High

23%

P/E Ratio
58.04

Risks & Considerations

Recent decline in both revenue
(-5.5% YoY) and profit (-18% YoY)
Operating margin declined to 18%
from 21% in the previous year
High P/E ratio of 58.04 indicates
potential overvaluation despite price
drop
Facing challenges in the beverages
business due to aggressive pricing
from competitors
Net profit margin of 13.8% is slightly
below our target threshold of 15%

Colgate-Palmolive India
Ltd
30% Below High Profit Margin:
Peak 21.62%

Company Profile
Colgate-Palmolive India Ltd is a
dominant player in the oral care
segment, manufacturing and trading
toothpaste, tooth powder,
toothbrushes, mouthwash, and
personal care products. The company's
flagship brand has an impressive 88%
penetration in the domestic market,
with 51% market share in toothpaste,
48% in toothpowder, and 30% in
toothbrushes.

The company has shown steady

financial growth with a 10.1% year-on-
year increase in revenue to Rs.16.2
billion for Q2 FY25. While the operating
profit margin declined slightly to 31%
from 33%, the net profit rose to Rs.3.9
billion with an improved net profit
margin of 24.4% compared to 23.1% in
the previous year. The stock is currently
trading at Rs.2,740, representing a
significant 30% discount from its 52-
week high of Rs.3,890.

Investment Thesis
Strong market leadership position in
oral care categories
Excellent profit margins (21.62% net
profit margin)
Trading at a 30% discount to 52-
week high, offering potential value
Consistent revenue growth (10.1%
YoY)
Strong brand recognition and high
market penetration (88%)
Continued investment in advertising
and brand building

Current Price
₹2,740

Net Profit Margin

21.62%

Operating Margin
31%

% Below 52-Week High

30%

Market Share (Toothpaste)

51%

Risks & Considerations

Slight decline in operating profit
margin (31% vs. 33% previously)
Increasing competitive intensity in
the toothpaste segment, particularly
in urban areas
Limited growth potential in mature
oral care categories
Dependency on a few core product
categories
Premium valuation compared to
broader market despite price
correction

Comparative
Analysis
Mishtann Vadilal
Metric
Foods Industr

Valuation Highly
Attracti
Attractiveness Attractive

Profit Margin Exceeds Exceed

vs. Threshold (22.60%) (16.60%

Debt Level Moderate Low (0.

Recent
Strong Strong
Performance

Market
Growing Establis
Position

Growth
High Good
Potential

Overall
★★★★☆ ★★★★
Rating

Key Insights

Best Value Play: Mishtann Foods

offers the most compelling
valuation with the lowest P/E ratio
(4.50) combined with exceptional
ROE (98.7%) and strong profit
margins (22.60%).

Strongest Balance Sheet: Dabur

India has the lowest debt-to-equity
ratio (0.04), followed closely by
Gopal Snacks (0.17), providing
significant financial flexibility.

Highest Profit Margins: Mishtann

Foods (22.60%) and Colgate-
Palmolive (21.62%) demonstrate the
strongest profit generation
capabilities.

Most Discounted from Peak:

Colgate-Palmolive is trading 30%
below its 52-week high, offering a
significant discount for a market
leader with strong margins.

Best Balance of Criteria: Vadilal

Industries offers an attractive
combination of strong profitability
(16.60% margin), low debt (0.36
D/E), reasonable valuation (P/E
18.3), and consistent growth (13%
YoY revenue growth).

Investment
Considerations &
Strategy
Portfolio Allocation Strategy
Based on our analysis, here is a
suggested allocation strategy for
investors looking to gain exposure to
undervalued FMCG stocks:

Company Allocation Rationale

Highest
value
Mishtann
20-25% potential
Foods
but higher
risk

Best
balance of
Vadilal
25-30% growth,
Industries
value, and
stability

Market
Colgate- leader at
20-25%
Palmolive significant
discount

Established
player with
Dabur
10-15% strong
India
balance
sheet

Growth
potential
Gopal
10-15% in
Snacks
expanding
category

Risk Management

Position Sizing: Limit exposure to

small-cap stocks like Mishtann
Foods to manage liquidity and
volatility risks.

Entry Strategy: Consider phased

buying to average prices, especially
for stocks that have seen significant
price corrections.

Diversification: Balance the portfolio

with stocks that have different
growth drivers and market
segments within FMCG.

Financial Analysis: Regularly monitor

quarterly results, especially for
companies showing recent
performance declines.

Valuation Check: Set target P/E

ratios for exit or portfolio
rebalancing to avoid holding
overvalued positions.

Catalysts to Monitor

Sector-Wide Factors
Rural demand recovery trends
Commodity price fluctuations
affecting margins
GST rate changes for FMCG
products
Growth of e-commerce and
quick commerce channels
Competitive intensity in key
categories

Company-Specific Triggers
New product launches and
category expansions
International market entry or
expansion
Margin improvement initiatives
Distribution network
enhancement
Strategic acquisitions or
partnerships

Time Horizon & Expectations

Investing in undervalued FMCG

stocks should be approached with
a medium to long-term horizon (2-
5 years) to allow for value
realization. Expected returns may
vary by company:
Small-cap plays (Mishtann
Foods): Higher potential returns
(20-30% annualized) with
higher volatility
Mid-cap opportunities (Vadilal,
Gopal Snacks): Moderate
returns (15-25% annualized)
with more stability
Large established players
(Dabur, Colgate): Steady returns
(12-18% annualized) with lower
volatility

Disclaimer
This analysis is for informational purposes only and
should not be considered as investment advice.
Always conduct your own research or consult with a
financial advisor before making investment
decisions. Stock prices, financial metrics, and market
conditions are subject to change, and past
performance is not indicative of future results.

About This Analysis

This document presents an analysis of selected
FMCG stocks in India based on specific criteria
including profitability, debt levels, price relative to
52-week lows, and growth potential. The analysis is
based on publicly available information as of May
2025.

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