Emkay: FMCG Sector -Confluence Of Events, Being Selective

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FMCG Sector

Confluence Of Events, Being Selective

n     Confluence of events circling consumer – (1) input cost pressure (2) rising intensity of competition and (3) restricted pricing actions

n     Earnings upgrade has become selective w.e.f Q2FY11 owing to multiple headwinds - earnings upgrades implemented in Titan and Jubilant FoodWorks (JFL)

n     Events worth highlighting – (1) Marico adhered to unit margin formula in difficult times and (2) JFL reported same-store growth of 39% yoy in 9MFY11

n     Prefer companies with better predictability in earnings which is combination of strong volume growth and pricing power – Marico, Titan and Jubilant FoodWorks are preferred picks