Angel Broking has come out with earning expectations for FMCG sector for the October-December quarter of 2012. The research firm expects 3QFY2013 to be a reasonably strong quarter for its FMCG universe with top-line and bottom-line growth coming in at 15.8 percent and 11 percent respectively.
Angel Broking Q3FY2013 expectations for FMCG sector: On the top-line front, our FMCG universe is expected to grow by 15.0% YoY. The occurrence of the festive season in the quarter is expected to boost performance of companies such as Asian Paints and United Spirits. Both the companies are expected to post a top-line growth of 20.3% and 17.7% respectively. Similarly, the integration of Darling group companies in phase II geographies in the consolidated accounts is expected to boost the revenue of GCPL which is expected to post a healthy top-line growth of 22.9%. Sensex companies ITC and HUL are expected to post top-line growths of 15.1% and 12.6% respectively. Despite the weak consumer sentiments, companies have adopted selective price increases during the quarter to protect margins. During the quarter, ITC had increased the prices of Goldflake cigarettes by ~6-7%. On the operating front, most of the companies are expected to post a decrease in OPMs due to increase in raw material and fuel costs. However, Marico is expected to post a 344bp YoY expansion in OPM due to lower copra prices. Thus we expect the FMCG universe to post an operating profit growth of 9.6% YoY. Outlook and valuation Consumption in many categories with potential for high growth rates is still very low in urban India. In rural India, penetration of these products is even lower. With rising income levels and changing consumer behavior in the country, consumer spending on branded FMCG products is set to rise. Also, growth in modern retail (currently contributing ~6% to FMCG sales) offers scope for further growth. The FMCG Index continued to outperform the broader market in the past quarter and most of the stocks are trading at close to all-time-high valuations. While the long-term consumption story for the FMCG industry remains intact, we believe the current lofty valuations are unjustified. Thus, we remain neutral on the sector. Quarterly estimates (Rs Cr.)| Company | Net Sales | Net Profit | ||
| 3QFY12E | % Chg | 3QFY12E | % Chg | |
| Asian Paints^ | 3,079 | 20.3 | 297.6 | 15.8 |
| Britannia | 1,480 | 18.6 | 57.7 | 6.8 |
| Colgate | 787 | 14.3 | 126.1 | 7.7 |
| Dabur India^ | 1,654 | 13.8 | 219.3 | 26.9 |
| GCPL | 1,652 | 22.9 | 173.8 | 4 |
| GSK Cons.* | 714 | 18.6 | 76.5 | 29.4 |
| HUL | 6,591 | 12.6 | 790.1 | 3.1 |
| ITC | 7,131 | 15.1 | 1,798 | 5.7 |
| Marico^ | 1,283 | 21.2 | 129.7 | 54.2 |
| Nestle* | 2,338 | 19.6 | 292.4 | 26.7 |
| TGBL^ | 1,910 | 6.5 | 110.2 | 32.3 |
| United Spirits# | 2,300 | 17.7 | 88.6 | 88.4 |
Note: Price as on December 31, 2012; * December year ending; ^Consolidated; #Quaterly numbers pertains to standalone financials Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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