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FMCG : IIFL: Q3 FY11 Sector Preview
We expect FMCG sector to continue its strong growth momentum in Q3 FY11. Higher input prices and
adspends are likely to restrict margin expansion.
HUL is expected post revenues worth Rs49.3bn, a growth of 9.5% yoy during Q3 FY11. New product
launches by HUL across various categories are likely to drive volume growth in the long term.
Adspends are likely to remain higher due to increased competitive intensity in most categories. OPM
will remain under pressure (down 250bps at 13.5%) due to higher raw material and advertising cost.
We expect HUL to witness 8.5% qoq growth and 5.7% yoy decline (due to margin pressure) in net
profit.
We expect ITC to report 14.4% yoy revenue growth at Rs51.8bn in Q3 FY11 driven by strong
performance in cigarette, agri and other-FMCG business. ITC’s cigarette sales remain unaffected by
the Marlboro’s launch of lower-price cigarette in Mumbai and Delhi. The management’s confidence of
ending FY11 with a flattish volume growth implies return of volume growth in H2 FY11. OPM is
expected to witness 60bps expansion aided by lower tobacco prices. We expect ITC to record 14.1%
yoy growth at Rs13.1bn in net profit during the quarter.
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