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FMCG
ƒ Volume growth to remain muted
FMCG companies (I-direct coverage universe) are expected to witness
revenue growth of ~18% YoY driven by the full impact of price hikes
taken in FY11 and Q1FY12, with volume growth remaining subdued. We
expect volume growth for consumer companies (Dabur, Jyothy
Laboratories and Marico) to be ~5-6% YoY and ~3-4% QoQ. For paint
companies, we remain more cautious on volume growth (less than ~5%
QoQ) on the back of slower growth in the automobile and real estate
industry. Also, the quarter remained dull in terms of any new launches
by the companies.
ƒ Margins to witness some respite and improve from hereon
With raw material costs remaining at higher levels, especially, coconut
oil (up 60% YoY), palm oil (up 30% YoY), copra (up 50% YoY), crude oil
(up 15% YoY) and titanium dioxide (up 44% YoY), companies undertook
a reduction in advertisement expenses and employed better operational
techniques to protect margins with further support from increase in
prices. Hence, we expect margins to witness a slight respite in Q2FY12E
on a QoQ basis but remain pressurised on a YoY basis
Company specific view
Company Remarks
Asian Paints Volume growth is expected to remain flat YoY with price growth leading revenue
growth of 12.7%. We believe price hikes (~12% FY11 and Q1FY12) will offset the
impact of RM costs and improve margins by 50 bps QoQ. PAT growth of ~13% YoY is
driven by higher revenues and no interest cost pressure
Dabur India Sales growth (28.3% YoY & 3.6% QoQ) would be price & volume led as it took further
price hikes both in Indian & international products. Margin estimate of 15.4% is lower
by 550 bps YoY but higher by 60 bps QoQ. Hence, declining margins & rising interest
cost for acquisition would keep PAT growth lower by 7% YoY
Jyothy Lab We expect standalone sales to de-grow ~11% YoY but improve ~7% QoQ. Ujala
Sales growth is estimated to be higher ~2% YoY, with Maxo & Exo continuing
to witness slowdown YoY. Also, no respite in RM costs would pull down margins
by ~230 bps YoY to 9% (8.8% in Q1FY12) with earnings slipping ~6% YoY
Kansai Nerolac With auto sales growth remaining moderate at ~13% YoY, we expect sales also to
grow 13.2% YoY with volume growth remaining subdued. Margins would remain at
14.3%, improving marginally QoQ but lower by 120 bps YoY. Consequently, we expect
PAT to grow at only 5% YoY to | 56.1 crore
Marico Marico took no further price increases during the quarter. The previous price
increases, ~20% YoY and an estimated 6% volume growth are expected to drive
revenue growth by 27.7% YoY. Impact of previous price hikes would keep margins flat
QoQ at 12%. However, YoY it could decline by ~70 bps
Source: Company, ICICIdirect.com Research
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