India Consumer FMCG report by Anand Rathi

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India Consumer - Wallet Watch - Vol 10/10

n       Sep ’10 saw a few launches. Competition continued to rise with consumer-goods manufacturers entering new segments. Higher raw material prices, especially agro-products, are increasingly putting pressure on margins.

n       Raw material prices. Raw material prices, especially agro-products, have risen by over 2% m-o-m. Prices of copra have increased 16% and would hit Marico. Crude oil derivatives, like LAB and PE, were unchanged in the month.

n       Notable launches. The major launches include Marlboro Regular filter cigarettes by Godfrey Philips. HUL launched Bharat packs at `25 and re-launched Red Label tea. GSK re-launched Horlicks. ITC entered noodles with the launch of Sunfeast Yippee noodles. Gillete launched Gillette Guard shaving razors (MRP: `5).

n       Pricing action. There was not much pricing action in Sep ’10. Major pricing actions were a 10% price hike in Powder hair dye by GCP. Nestlé India reduced Maggi noodles weight by 5% to 6%. 

n       Acquisitions. Godrej Consumer has announced the merger of its 100% subsidiary GHCL with itself. Though this would impact earnings due to the higher amortization, it would expand cash flows from lower income taxes.

n       Stock calls. We maintain Buys on Colgate, Marico, GCP,
GSK-CH and Emami; and Holds on Asian Paints and Dabur; we recommend a Sell on ITC, HUL, Nestlé India and Britannia.

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