Motilal Oswal has come out with its earnings estimates for consumer sector for the quarter ended December 2012. The research firm feels the EBITDA is likely to grow by 21.3 percent led by margin expansion in Hindustan Unilever, ITC, Asian Paints, Nestle, GSK Consumer and Marico.
Motilal Oswal's report on Q3FY13 earnings estimates of consumer sector: 3QFY13 organic sales and PAT to grow 20 percent: We estimate our coverage universe to post ~15 percent revenue growth and 20 percent PAT growth during 3QFY13. EBITDA is likely to grow by 21.3 percent led by margin expansion in Hindustan Unilever (HUL), ITC, Asian Paints (APNT), Nestle (NEST), GSK Consumer and Marico (MRCO). We expect ITC to post 17.6 percent sales growth (2 percent cigarette volume growth) and 19 percent PAT growth. HUL’s sales are likely to grow 13 percent (volume growth of 7 percent), with EBITDA margin expansion of 60bp to 16.2 percent. Discretionary segments in personal care and processed foods continue to remain under stress. Volume growth to moderate marginally; discretionary segment under pressure: Consumer demand is showing softening in certain discretionary categories like premium skin care, processed foods, ice-cream etc. We expect some moderation in volume growth in the staples universe. CSD de-stocking would continue to suppress volumes for one more quarter, in our view. We assume a slight moderation in volume growth for HUL, MRCO, GSK Consumer and Colgate. Godrej Consumer’s (GCPL) domestic business momentum, especially in home insecticide, shall continue, in our view. Input costs correction offset by currency depreciation; premiumization continues: Input costs have shown a mixed trend, with a correction in palm oil, copra and Tio2,while LAB, milk, packaging sugar and wheat prices remain high. Gains from input correction could be offset to an extent by currency depreciation, thus preventing full flow through of benefits to gross margins. We expect gross margin expansion for HUL, MRCO, ITC, Dabur, GSK, NEST. Premiumization remains strong in most HPC categories. New launches modest; ad spends to remain high to defend market shares: New launch activity has been modest in 3QFY13. HUL entered the premium hair oils category with the launch of Dove Elixir. However, we expect ad-spends to remain high to support the launches done in the past. Rising competition, due to soft PFAD prices, would prevent any contraction in advertising spends. Expected quarterly performance summary (INR Million)| Company | Sales | Net Profit | ||||
| Dec.12 | Var. | Var. | Dec.12 | Var. | Var. | |
| % YoY | % QoQ | %YoY | %QoQ | |||
| Asian Paints | 29,920 | 16.9 | 14.4 | 3,159 | 23 | 32.1 |
| Britannia | 14,080 | 12.9 | 0.4 | 622 | 15 | 36.4 |
| Colgate | 7,850 | 17.2 | 1.5 | 1,300 | 12.5 | -10.4 |
| Dabur | 16,300 | 12.2 | 7.1 | 2,016 | 16.6 | -0.4 |
| Godrej Consumer | 17,630 | 31.2 | 10.5 | 2,187 | 30.9 | 37.3 |
| GSK Consumer | 6,684 | 11 | -19.2 | 799 | 23.7 | -37.8 |
| HUL | 67,325 | 13 | 6.7 | 9,098 | 19.4 | 12.9 |
| ITC | 73,500 | 17.6 | 1.7 | 20,226 | 18.9 | 10.1 |
| Marico | 12,250 | 15.8 | 6 | 1,097 | 30.4 | 27.7 |
| Nestle | 21,713 | 11.1 | 2.6 | 2,880 | 7.4 | 9.5 |
| Pidilite | 8,400 | 21.9 | 2.3 | 1,099 | 17 | -1.6 |
| Radico Khaitan | 3,420 | 13.4 | 15.1 | 251 | 18.3 | 21 |
| United Spirits | 21,500 | 10 | -3.2 | 853 | 160.5 | 117.2 |
| Sector Aggregate | 300,571 | 15.4 | 4.1 | 45,586 | 20.1 | 11.6 |
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