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FMCG
Q3FY12 Preview: A stronger quarter ahead
We expect a strong quarter from our FMCG universe with topline/EBITDA/PAT
growth of 18%/19.5%/20.3% YoY, led by EBITDA margin expansion of 50bps—the
first margin uptick in four quarters. Potentially strong Q3 performers include
HUVR, ITC, MRCO, BRIT, GCPL, GSK Consumer and CLGT, whereas NEST,
APNT, UNSP and Dabur could deliver muted PAT growth. HUVR and ITC remain
our top picks, though select mid-caps look attractive as well (MRCO, BRIT, UNSP,
GSK Consumer, Emami) in the wake of strong large-cap outperformance.
v Expect sales growth of 18% YoY: We expect sales to increase by 17.9% YoY for
our FMCG universe, led by strong organic numbers from GCPL, BJCOR, MRCO,
NEST and BRIT. Volume growth is likely to remain steady with CLGT, MRCO and
BJCOR reporting healthy numbers. We expect large-caps HUVR and ITC to report
strong topline growth YoY at 16% and 18.5% respectively.
v Operating margins to improve 50bps YoY: The average operating margin for our
FMCG universe is likely to expand by 50bps YoY, the first increase in four quarters.
Though gross margins would still contract YoY for most companies due to the
higher raw material prices, the decline would be limited by a lower base and
flattening of input costs QoQ. We expect EBITDA margins to improve the most for
CLGT, GCPL, BRIT, HUVR and ITC while a few companies such as Dabur, JYL
and APNT will continue to witness YoY declines.
v Key issues to watch for: (1) Any signs that a consumer spending slowdown is
denting category volume growth. (2) Pricing action/strategy in highly competitive
categories such as shampoos, biscuits and detergents. (3) A&P spending trend post
weak H1FY12 spending. (4) Gross margin pressure on a QoQ basis. (5) Product mix
shifts across categories. (6) Forex impact.
v HUVR and ITC our top picks: HUVR and ITC remain our top picks in the sector.
However, following the strong outperformance of sector large-caps over mid-caps in
the last six months, the risk-reward has now turned favourable for select mid-caps.
Our preferred picks in the mid-cap space include MRCO, BRIT, GSK Consumer,
Emami and UNSP. We remain UNDERWEIGHT on CLGT, NEST, APNT, UBBL
and JYL.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
FMCG
Q3FY12 Preview: A stronger quarter ahead
We expect a strong quarter from our FMCG universe with topline/EBITDA/PAT
growth of 18%/19.5%/20.3% YoY, led by EBITDA margin expansion of 50bps—the
first margin uptick in four quarters. Potentially strong Q3 performers include
HUVR, ITC, MRCO, BRIT, GCPL, GSK Consumer and CLGT, whereas NEST,
APNT, UNSP and Dabur could deliver muted PAT growth. HUVR and ITC remain
our top picks, though select mid-caps look attractive as well (MRCO, BRIT, UNSP,
GSK Consumer, Emami) in the wake of strong large-cap outperformance.
v Expect sales growth of 18% YoY: We expect sales to increase by 17.9% YoY for
our FMCG universe, led by strong organic numbers from GCPL, BJCOR, MRCO,
NEST and BRIT. Volume growth is likely to remain steady with CLGT, MRCO and
BJCOR reporting healthy numbers. We expect large-caps HUVR and ITC to report
strong topline growth YoY at 16% and 18.5% respectively.
v Operating margins to improve 50bps YoY: The average operating margin for our
FMCG universe is likely to expand by 50bps YoY, the first increase in four quarters.
Though gross margins would still contract YoY for most companies due to the
higher raw material prices, the decline would be limited by a lower base and
flattening of input costs QoQ. We expect EBITDA margins to improve the most for
CLGT, GCPL, BRIT, HUVR and ITC while a few companies such as Dabur, JYL
and APNT will continue to witness YoY declines.
v Key issues to watch for: (1) Any signs that a consumer spending slowdown is
denting category volume growth. (2) Pricing action/strategy in highly competitive
categories such as shampoos, biscuits and detergents. (3) A&P spending trend post
weak H1FY12 spending. (4) Gross margin pressure on a QoQ basis. (5) Product mix
shifts across categories. (6) Forex impact.
v HUVR and ITC our top picks: HUVR and ITC remain our top picks in the sector.
However, following the strong outperformance of sector large-caps over mid-caps in
the last six months, the risk-reward has now turned favourable for select mid-caps.
Our preferred picks in the mid-cap space include MRCO, BRIT, GSK Consumer,
Emami and UNSP. We remain UNDERWEIGHT on CLGT, NEST, APNT, UBBL
and JYL.
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