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Growth not under question
Coverage universe expected to report 18% topline growth
We expect our FMCG universe to register robust topline growth of
~18% YoY in Q3FY12, driven by healthy volumes and price hikes. In
our large cap coverage, companies like Hindustan Unilever, ITC and
Nestle are expected to post YoY sales growth of 16.2%, 17.6%, and
20.6% respectively; while mid-caps should see Dabur (25%) and
Marico (24%) in the vanguard. Godrej Consumer would likely post
31% growth on the back of the Darling group acquisition.
Price hikes, benign raw material spur margins
Price hikes, benign raw materials (baring few like palm oil and Mentha
oil) are expected to boost margins on YoY basis to most players in
Q3FY12. We expect our coverage universe EBITDA margin to expand
by 119bps YoY to 15.5% (excluding ITC) in Q3FY12. The biggest
contributors to EBITDA margin expansion are expected to be HUL
(153bps), Nestle (136bps) and Colgate (479bps) on lower ad spend vs
Sensitive launch related high expenses in Q3FY11). Average palm oil
price, used for soaps, was up by 1.3% over the past three months and
is on a firm footing with continuing rupee depreciation. Higher palm
oil price could impact HUL’s and GCPL’s margins in Q4FY12; however
judicious price hikes and stable LAB (Linear Alkyle Benzene) prices
(used for detergent) is expected to arrest margin contraction. Copra
(coconut oil), cocoa (chocolate), high-density polyethylene (HDPE) and
coffee have declined by 10%, 18.4%, 4% and ~10.4% respectively over
the past three months. Marico, Nestle, and Tata Global Beverage are
expected to gain from the correction going ahead.
Net profit surges by 21%; top picks–HUL, Nestle, Marico & Dabur
Net profit for our coverage universe is expected to grow by 21.4% YoY
in Q3FY12. The rupee depreciation of 11.6% QoQ could impact
earnings of GCPL by 14.4% due to MTM loss of INR 261.5mn arising on
US$50mn inter-company loans in overseas subsidiaries. After recent
price correction, we find comfort in valuations and earnings growth
prospects of HUL, Nestle, ITC, Marico and Dabur.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Growth not under question
Coverage universe expected to report 18% topline growth
We expect our FMCG universe to register robust topline growth of
~18% YoY in Q3FY12, driven by healthy volumes and price hikes. In
our large cap coverage, companies like Hindustan Unilever, ITC and
Nestle are expected to post YoY sales growth of 16.2%, 17.6%, and
20.6% respectively; while mid-caps should see Dabur (25%) and
Marico (24%) in the vanguard. Godrej Consumer would likely post
31% growth on the back of the Darling group acquisition.
Price hikes, benign raw material spur margins
Price hikes, benign raw materials (baring few like palm oil and Mentha
oil) are expected to boost margins on YoY basis to most players in
Q3FY12. We expect our coverage universe EBITDA margin to expand
by 119bps YoY to 15.5% (excluding ITC) in Q3FY12. The biggest
contributors to EBITDA margin expansion are expected to be HUL
(153bps), Nestle (136bps) and Colgate (479bps) on lower ad spend vs
Sensitive launch related high expenses in Q3FY11). Average palm oil
price, used for soaps, was up by 1.3% over the past three months and
is on a firm footing with continuing rupee depreciation. Higher palm
oil price could impact HUL’s and GCPL’s margins in Q4FY12; however
judicious price hikes and stable LAB (Linear Alkyle Benzene) prices
(used for detergent) is expected to arrest margin contraction. Copra
(coconut oil), cocoa (chocolate), high-density polyethylene (HDPE) and
coffee have declined by 10%, 18.4%, 4% and ~10.4% respectively over
the past three months. Marico, Nestle, and Tata Global Beverage are
expected to gain from the correction going ahead.
Net profit surges by 21%; top picks–HUL, Nestle, Marico & Dabur
Net profit for our coverage universe is expected to grow by 21.4% YoY
in Q3FY12. The rupee depreciation of 11.6% QoQ could impact
earnings of GCPL by 14.4% due to MTM loss of INR 261.5mn arising on
US$50mn inter-company loans in overseas subsidiaries. After recent
price correction, we find comfort in valuations and earnings growth
prospects of HUL, Nestle, ITC, Marico and Dabur.
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