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FMCG
Price led topline growth
FMCG companies (I-Direct coverage universe) are expected to witness
revenue growth of ~17% YoY mainly led by price hikes in last four
quarters. We expect volume growth to be muted as sharp prices
increase and overall demand slowdown has impacted volumes.
Simultaneously down-trading and usage of lower SKUs has also
impacted volumes. However, ITC would continue to witness strong
volume growth (4-5%) in cigarettes, which would result in higher topline
growth in for the company.
Margins would continue to remain under pressure
The key raw materials (palm oil-20%, copra-30%, sunflower oil-5%,
titanium dioxide-50%, Sugar-12%, and tea ~15/kg) witnessed a
significant rise. Most of the companies have taken price hikes to
counter this rise in commodity prices. However, 20% rupee
depreciation from September onwards has impacted FMCG companies
with the high imported raw materials. Asian paints and Kansai Nerolac,
with 20%+ imported raw materials would be impacted the most.
Company specific view (FMCG)
Asian Paints We expect the 14% topline growth largely driven by price hikes rather than volume
based growth. We believe margins would remain under pressure due to high raw
material cost as company imports 20% its raw material. PAT growth of 8% would be
largely driven by revenues.
Dabur India Sales growth (22% YoY and 6.8%QoQ) would be price led growth and volumes would
remain muted. However growth from internation market would remain strong.
Margins would remain under pressure declining by 130bps QoQ.
ITC We expect the company to witness 16% topline growth and 20% bottomline growth.
We believe cigarettes volume growth(~5%) would continue to remain strong and
losses from FMCG segmet would witness a continuous decline.
Jyothy Lab We believe Jyothy lab would continue to witness flat topline growth as its home
care segment is expect to witness decline in volumes. Simultaneosuly fabric wash
segment is also witnessing slower growth. We believe margins would take a beating
as raw material cost has risen sharply.
Kansai Nerolac The company is expected to witness 18% topline growth on the back of prices
increases taken by company. However volume growth would continue to remain
muted. We expect margins to decline by 110 bps from Q2FY12.
Marico The company would witness 26% topline growth however earning growth would
remain at 16% due to higher raw material cost. Copra prices are going up
continuously, which would keep the margins under pressure in the current quarter.
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
FMCG
Price led topline growth
FMCG companies (I-Direct coverage universe) are expected to witness
revenue growth of ~17% YoY mainly led by price hikes in last four
quarters. We expect volume growth to be muted as sharp prices
increase and overall demand slowdown has impacted volumes.
Simultaneously down-trading and usage of lower SKUs has also
impacted volumes. However, ITC would continue to witness strong
volume growth (4-5%) in cigarettes, which would result in higher topline
growth in for the company.
Margins would continue to remain under pressure
The key raw materials (palm oil-20%, copra-30%, sunflower oil-5%,
titanium dioxide-50%, Sugar-12%, and tea ~15/kg) witnessed a
significant rise. Most of the companies have taken price hikes to
counter this rise in commodity prices. However, 20% rupee
depreciation from September onwards has impacted FMCG companies
with the high imported raw materials. Asian paints and Kansai Nerolac,
with 20%+ imported raw materials would be impacted the most.
Company specific view (FMCG)
Asian Paints We expect the 14% topline growth largely driven by price hikes rather than volume
based growth. We believe margins would remain under pressure due to high raw
material cost as company imports 20% its raw material. PAT growth of 8% would be
largely driven by revenues.
Dabur India Sales growth (22% YoY and 6.8%QoQ) would be price led growth and volumes would
remain muted. However growth from internation market would remain strong.
Margins would remain under pressure declining by 130bps QoQ.
ITC We expect the company to witness 16% topline growth and 20% bottomline growth.
We believe cigarettes volume growth(~5%) would continue to remain strong and
losses from FMCG segmet would witness a continuous decline.
Jyothy Lab We believe Jyothy lab would continue to witness flat topline growth as its home
care segment is expect to witness decline in volumes. Simultaneosuly fabric wash
segment is also witnessing slower growth. We believe margins would take a beating
as raw material cost has risen sharply.
Kansai Nerolac The company is expected to witness 18% topline growth on the back of prices
increases taken by company. However volume growth would continue to remain
muted. We expect margins to decline by 110 bps from Q2FY12.
Marico The company would witness 26% topline growth however earning growth would
remain at 16% due to higher raw material cost. Copra prices are going up
continuously, which would keep the margins under pressure in the current quarter.
Source: Company, ICICIdirect.com Research
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