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FMCG
Topline growth led by another round of price hikes
We expect the revenue growth in Q4FY11E to be robust at ~16%
YoY led largely by the further price increases taken during the
quarter. Marico increased the prices of Saffola oils in February, 2011
by 3-8% while Dabur increased prices of hair oil (4-8%), toothpaste
(7%), Chyawanprash (7%), Odomos (8-10%) and Gulabari (8-10%).
Even paint companies took a further price increase of ~2% in
January, 2011 following the shortage of titanium dioxide and
increasing crude prices.
Profitability to remain a concern
In spite of the price increase by companies, the uptrend in raw
material costs continued in Q4FY11. Hence, margins would continue
to be under pressure. Moreover, with the slew of ongoing
expansions (both organic and inorganic), borrowings have also
increased leading to higher interest cost, thereby dragging the
bottomline too.
Company specific view
Company Remarks
Asian Paints Sales growth of ~6% YoY to |1981 crore in Q4FY11E would be led by ~4% volume growth
and ~2% price increase taken in January 2011 (total of ~12% in FY11). However, shooting
RM prices (~15% higher than last year) would continue to strain the margins, which we
expect will slip by almost 80 bps YoY to 15.8%
Dabur India We expect sales growth of 27% YoY to |1079 crore with contribution of int'l business rising
to 25%. An 8-10% price hike in hair oil & oral care would negatively impact volume growth.
Also, with RM prices in an uptrend, margins would dip to 19% & higher interest cost would
pull down the PAT margins to 14%
Jyothy Lab Maxo's sales would continue to remain subdued YoY. However, it would improve QoQ.
Soaps & detergents could show marginal increase of ~5%. Hence, we expect sales to
decline ~6% YoY to | 201 crore with margins also declining by ~200 bps to 11.4%
Kansai
Nerolac
Topline is expected to grow by ~30% YoY to | 552.1 crore driven by both volume (robust
demand from automakers) & value growth. Shortage of RM (titanium dioxide) and increase
in crude prices would, however, continue to haunt margins pulling it down to 12% (dip of
180 bps YoY)
Marico Revenue is expected to grow ~30% YoY to |785crore led by acquisitions, price increases
& expanding product portfolio. Led by higher interest due to borrowings for acquisitions,
PAT margins would decline 40 bps to 8.1%. Sale of Sweekar (edible oil brand) has not been
included in our Q4FY11 estimates.
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
FMCG
Topline growth led by another round of price hikes
We expect the revenue growth in Q4FY11E to be robust at ~16%
YoY led largely by the further price increases taken during the
quarter. Marico increased the prices of Saffola oils in February, 2011
by 3-8% while Dabur increased prices of hair oil (4-8%), toothpaste
(7%), Chyawanprash (7%), Odomos (8-10%) and Gulabari (8-10%).
Even paint companies took a further price increase of ~2% in
January, 2011 following the shortage of titanium dioxide and
increasing crude prices.
Profitability to remain a concern
In spite of the price increase by companies, the uptrend in raw
material costs continued in Q4FY11. Hence, margins would continue
to be under pressure. Moreover, with the slew of ongoing
expansions (both organic and inorganic), borrowings have also
increased leading to higher interest cost, thereby dragging the
bottomline too.
Company specific view
Company Remarks
Asian Paints Sales growth of ~6% YoY to |1981 crore in Q4FY11E would be led by ~4% volume growth
and ~2% price increase taken in January 2011 (total of ~12% in FY11). However, shooting
RM prices (~15% higher than last year) would continue to strain the margins, which we
expect will slip by almost 80 bps YoY to 15.8%
Dabur India We expect sales growth of 27% YoY to |1079 crore with contribution of int'l business rising
to 25%. An 8-10% price hike in hair oil & oral care would negatively impact volume growth.
Also, with RM prices in an uptrend, margins would dip to 19% & higher interest cost would
pull down the PAT margins to 14%
Jyothy Lab Maxo's sales would continue to remain subdued YoY. However, it would improve QoQ.
Soaps & detergents could show marginal increase of ~5%. Hence, we expect sales to
decline ~6% YoY to | 201 crore with margins also declining by ~200 bps to 11.4%
Kansai
Nerolac
Topline is expected to grow by ~30% YoY to | 552.1 crore driven by both volume (robust
demand from automakers) & value growth. Shortage of RM (titanium dioxide) and increase
in crude prices would, however, continue to haunt margins pulling it down to 12% (dip of
180 bps YoY)
Marico Revenue is expected to grow ~30% YoY to |785crore led by acquisitions, price increases
& expanding product portfolio. Led by higher interest due to borrowings for acquisitions,
PAT margins would decline 40 bps to 8.1%. Sale of Sweekar (edible oil brand) has not been
included in our Q4FY11 estimates.
Source: Company, ICICIdirect.com Research
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