Q1FY13 Results Preview
FMCG
Pricing-led growth
We expect Q1FY13 results to be robust on the back of strong pricing-led growth due to regular price hikes and premiumization strategy. Volume growth would be subdued despite normalised CSD demand. Due to low promotion activities we expect companies to post margin expansion.
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m Pricing-led growth: We expect sales growth to be price led for most consumer companies. GSK Consumer and Nestle are likely to report moderate volume growth while Colgate would report double digit volume growth in the toothpaste category. CSD demand has normalised from Q4FY12 but still is down on YoY basis which would further dampen volumes.
m Softening raw material prices to boost margins: Raw material prices of edible oil and agri commodities such as wheat, sugar and palm oil have remained soft during the quarter and would benefit most companies. We have modelled margin expansion for all the companies under coverage.
m Profits to decline: PAT for our coverage universe is expected to grow by 22% YoY. Colgate and GSK Consumer are expected to grow more than 23% and Nestle by 19.5%.
m Future focus on volume growth: With monsoons below normal, companies are expected to lure consumers with sales promotions and launch new products in H2FY13 which would increase A&P spends which is expected to be offset by softening RM cost.
m Neutral on the sector: We maintain BUY on GSK Consumer but are Neutral on Nestle and Colgate.
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