Indian Consumer Goods: Volume robust; margin to expand:: Edelweiss,

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Key trends in Q2FY12: Hard bargaining for margin
Volume spur on: Volume for 12 out of 14 companies better than or in line with expectations; positive
surprises: HUL, ITC, Marico, Colgate, GCPL.
Ad spend kept under control: Ten companies (out of 13) cut it in terms of % of sales. Three trimmed ad
spends on absolute basis (in Q1FY12, 4/11 cut on absolute basis).
Strain on gross margin extend: Gross margins of 15 companies (out of 21) have dipped significantly (save
Nestle, Agro Tech, Zydus, Britannia and most cigarette businesses).
EBIDTA margin dips: EBITDA margin of 14 (out of 21) companies declined, though much lower than gross
margin. Laggards like Soaps, detergents, biscuits improve margin.
Pricing power rises: Majority take calibrated price hikes, higher than previous quarters. Quality of sales growth
was significantly better with balanced blend of price and volume growth.
New launches at slower pace: Companies are persisting with innovations and product launches across
segments, albeit at a reduced pace.
Forex loss drags down margins: INR’s depreciation against most major currencies led to MTM forex loss for
many companies, adding to the woes of increased material costs.
International businesses continue to bloom: In most cases businesses reported healthy growth despite
global economic pressures.
Q2FY12 - Hits: HUL, ITC, Nestle, GCPL; Misses: Dabur, Asian Paints, Zydus Wellness
Top picks: HUL, GCPL, Marico, ITC.