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FMCG
FMCG
ƒ Price led growth in revenues
Sales growth of ~19% in Q2FY11 was led by almost a 15% increase
in volumes. However, in Q3FY11E, we expect growth to be driven by
the impact of increase in prices. Companies across the sector had
taken calibrated price increases in H1FY11 with Marico taking the first
round of price increase across few SKUs of Parachute and Saffola in
August, 2010 by ~5% and the second in October, 2010 by ~7%.
Dabur increased prices of Odonil, Meswak and Vatika Hair Oil by 5%,
3% and 7%, respectively, in the past three months. Asian Paints and
Kansai raised prices in phases in April, June, August and October to
almost 11% YTD in the decorative paints segment. Thus, the impact
from these would be witnessed in revenue growth in Q3FY11.
ƒ Advertisement expenses to remain higher
We believe advertisement costs would increase by 20-50 bps QoQ
and ~100 bps YoY led by a slew of new launches across categories.
Dabur launched Nutrigo (health supplement), Honitus (cough syrup)
and Chyawanprash in mango and orange flavours. Marico introduced
variants such as Parachute Advanced and Parachute Jasmine in the
hair oil category while also venturing into packaged rice & oats
segment. HUL also launched Vaseline Menz, Knorr Soupy Noodles
and new products in Lakme and Ponds brands. Hence, backed by
these new interventions we expect marketing costs in Q3FY11 to be
higher
Asian Paints Q3FY11 being the festive quarter, we expect sales to rise 29% YoY & ~16% QoQ to |
2091 crore. In spite of a series of price increases in H1FY11 (11%), we expect margins
to remain under pressure, declining by 50 bps to 17.8% QoQ as any further price
increase in the quarter could have impacted volume growth
Dabur India We expect sales growth of 12% QoQ & 17% YoY driven by rise in Chyawanprash
(launched in two new flavors) & Real Fruit Juice (extensive advertisement) sales.
International business is likely to grow 8% QoQ including sales of Hobe Kozmetik.
Margins could slide 230 bps impacted by higher raw material & ad expenses
Kansai
Nerolac
With raw material prices inching up by 12%, Kansai hiked prices by 10% YTD. With the
festive season during the quarter and no further price increases until mid-January, we
expect good volume growth (both in the decorative and auto segment) driving topline
by 35% YoY in Q3FY11
Marico Price increase in Saffola, Parachute in H1FY11 is likely to drive Q3FY11 sales growth by
13% YoY. Despite price increase, spiralling input costs & higher ad expenses (13% in
Q3FY11E) would drag margins to 13% from 14.8% in Q3FY10. We expect 60% & 20%
YoY growth in Kaya, international biz, respectively, in Q3FY11
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