Consumer Goods - Margins make a sharp recovery; sector update: Edelweiss

Highlight a few key trends:

·       Volume surprises positively for non-discretionary: Despite slowdown blues,  13 out of 18 companies posted volume growth in line/better than expectations. Premiumization trend continues with no major signs of downtrading.

·       Rural growth : Remains strong and ahead of urban growth for most companies.

·       Discretionary slowdown is for real: Slowdown in discretionary spending in Q1FY13; categories like paints, foods, liqour and retail formats (like Kaya, Titan, Pantaloon, Shoppers) see a demand slowdown. Personal products, soap & detergents, household products remain unscathed.

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·       Canteen sales: Good recovery QoQ, but down YoY.

·       Gross margins : Expand sharply.

·       EBITDA margins : Grow handsomely despite a sharp increase in ad spends.

·       Innovation: Pace of new launches picking up.

·       International growth : Africa disappoints for most of the companies.

·       Pricing action : Most companies yet to pass on the benefit.

·       FICCI FMCG & Retail Conference : Key Takeaways.

·       Q1FY13 results | Hits: HUL, ITC, GCPL, Marico. Misses: Nestle, Asian Paints.

·       Top picks: HUL, Dabur, Marico, Emami, ITC.

Consumer Goods - Margins make a sharp recovery; sector update

Regards,