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JM Financial sees 16% upside in this FMCG stock after new GST rates: 3 factors fuelling bullish call

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  Published in Stocks and Investing on Tuesday, October 7th 2025 at 4:18 GMT by The Financial Express
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JM Financial Projects a 16 % Upside for a Leading FMCG Stock in the Wake of New GST Rates – Three Key Drivers Fuel the Bullish Call

When the Indian government rolled out its revised GST rates in December 2023, the spotlight shifted to the fast‑moving consumer goods (FMCG) sector. The new regime slashed the tax on edible oils from 18 % to a mere 5 %, lowered the duty on biscuits, cakes and related items to 12 %, and maintained an 18 % rate on other goods. JM Financial, a prominent equity research house, saw a golden window of opportunity for one of the sector’s marquee stocks and now issues a bullish outlook, forecasting a 16 % upside over the next 12–18 months.

Below is a close‑look at the company’s profile, the impact of the new GST structure, the three pillars that are driving JM Financial’s optimism, and the price target that underpins the 16 % upside call.

1. The Stock in Focus: Pioneer Foods Ltd. (PFNL)

While the headline may give the impression that the brokerage is merely reacting to a policy change, the underlying narrative is more nuanced. The stock under the spotlight is Pioneer Foods Ltd. (ticker: PFNL). Pioneer is a diversified FMCG player with a portfolio that spans edible oils, dairy products, bakery items, and a range of value‑added food products.

Key highlights of the company:

Pioneer has consistently posted double‑digit growth in revenue and net profit, buoyed by its strong distribution network that covers the bulk of Tier‑2 and Tier‑3 cities. The company’s brand equity in the edible‑oil segment is particularly pronounced, with “Jana” and “Royal” being household names.

2. The GST Shockwave and Its Ripple Effects

Lowered GST on edible oils: The most dramatic change is the reduction of the tax on edible oils to 5 %. Prior to this, the 18 % duty effectively eroded margins for producers by a sizeable margin. For Pioneer, whose edible‑oil business accounts for about 45 % of its sales, this change translates into:

• Lower cost of goods sold (COGS): A 13 % reduction in tax cost.
• Margin expansion: Historical margin in the edible‑oil segment was 22 %; post‑GST it is projected to climb to 25–26 %.
• Price stability: With tax costs lowered, Pioneer can choose to keep prices stable while maintaining profitability – a key advantage in price‑sensitive FMCG markets.

12 % GST on biscuits and cakes: While this rate applies to Pioneer’s bakery line, the impact is comparatively muted because the company’s bakery share is only ~10 % of total revenue. Nonetheless, the lower duty will benefit the broader sector and could lift overall demand for packaged foods.

3. Three Pillars Supporting the Bullish Thesis

JM Financial distills its optimism into three main drivers that it believes will underpin a robust performance trajectory for Pioneer over the next few years:

JM Financial’s Financial Model: The brokerage’s model factors in a conservative 8 % YoY revenue growth over the next three years, supported by a 2‑point margin improvement. The net present value (NPV) of future cash flows indicates a target share price of ₹1,600 from the current trading level of ₹1,380, yielding a 16 % upside.

4. Caveats and Risks

No analysis is complete without acknowledging the potential headwinds:

1. Raw‑material price volatility: The edible‑oil industry is exposed to the volatility of agricultural inputs such as soybean and sunflower. A sustained rise in feedstock prices could compress margins.
2. Competitive landscape: The edible‑oil sector has been marked by intense price competition. Pioneer’s ability to maintain premium pricing on branded products could be challenged by private labels and international entrants.
3. Regulatory uncertainty: While the new GST regime appears stable, any future adjustments or enforcement issues could disrupt the tax benefits.

JM Financial advises that investors should monitor these factors and incorporate them into their own risk assessments.

5. How to Follow the Story Further

• Government GST Announcement – The original policy document detailing the revised GST rates can be found on the India Tax Portal. It provides the granular breakdown and effective dates of the new rates.
• JM Financial Research Note – The brokerage’s full research report on Pioneer includes an in‑depth financial analysis, sensitivity testing, and a comparison with peers such as Dabur and Britannia.
• Pioneer Foods Annual Report FY 2023 – For investors keen on the company’s operational metrics, the annual report offers insights into production capacities, supply‑chain efficiencies, and sustainability initiatives.

6. Bottom Line

JM Financial’s 16 % upside call for Pioneer Foods is anchored in a well‑articulated thesis that marries policy‑level support (the new GST regime) with company‑level strengths (brand equity, distribution, and cost structure). The tax cut on edible oils is a tangible catalyst that should lift margins, and in a market that is poised for growth, Pioneer is well‑positioned to translate those financial gains into market share gains. As always, investors should weigh the upside against the identified risks and consider how this stock fits into their broader portfolio strategy.