MOST expects steady qtr for consumer sector; 18% PAT growth

Motilal Oswal has come out with its earnings estimates on consumer sector for September quarter FY13. According to the research firm, steep INR depreciation has negated the impact in many commodities, prices of which are linked globally. Britannia, GlaxoSmithKline, Hindustan Unilever, Nestle and Marico are likely to report EBITDA margin expansion while Asian Paints and Colgate are likely to report flat margins.

Expect another steady quarter - 16% sales growth, 18% PAT growth: For 2QFY13, we expect our coverage universe to post ~16% revenue growth (16% in 1QFY13) and ~18% PAT growth (~22% in 1QFY13). EBITDA is likely to grow 18.5% on sustained revenue growth and softening input costs. We expect ITC to post 16% sales growth (1% cigarette volume growth) and ~17% PAT growth; Hindustan Unilever's sales are likely to grow 15% (volume growth of 8%) and PAT is likely to grow 19%, led by healthy growth in Soaps & Detergents and Personal Care products.

No concerns on broadbased demand outlook; no down-trading witnessed: Except for a few discretionary categories, consumer demand in Processed Foods has been healthy. Late revival of the monsoon provides respite to future rural consumer demand. Despite the past few quarters of price hikes, volume growth across product categories is likely to remain healthy. We expect moderation in demand in few discretionary categories. All companies under our universe, barring Nestle, are likely to report healthy volume growth in HPC categories.

Agri-based input costs and crude soften; INR depreciation negates impact: Prices of edible oils like groundnut oil, safflower oil and sunflower oil, and other agri commodities like copra, wheat, barley, sugar and palm oil are down on a YoY basis. Prices of crude and crude-linked commodities are also on a downward trend. However, steep INR depreciation has negated the impact in many commodities, prices of which are linked globally. Britannia, GlaxoSmithKline, Hindustan Unilever, Nestle and Marico are likely to report EBITDA margin expansion while Asian Paints and Colgate are likely to report flat margins.

Sustenance of volume growth amidst weaker macro environment will be the key highlight of 2QFY13, in our view. For 2QFY13, we estimate our coverage universe to post ~16% revenue growth (16% in 1QFY13) and ~18% PAT growth (~22 % in 1QFY13). EBITDA is likely to grow 18.5% on the back of sustained revenue growth and some softening in input costs. We expect ITC to post 16% sales growth (1% cigarette volume growth) and ~17% PAT growth; HUL’s sales are likely to grow 15% (8% volume growth) and 19% PAT growth.

(INR Million)

Company	Sales			Net Profit
	Sep.12	Var. % YoY	Var. % QoQ	Sep.12	Var. % YoY	Var. % QoQ
Asian Paints	25,500	13.3	0.4	2,428	16.3	-15.8
Britannia	14,500	12	18.7	548	12.3	26.2
Colgate	7,700	17.2	4.6	1,253	16.5	6.7
Dabur India	14,700	16.5	0.5	2,122	22.1	37.5
Godrej Consumer	16,250	37	17	1,736	35.9	33
GSK Consumer	8,100	12.5	11	1,153	11.9	8.2
Hindustan Unilever	64,500	15	1.1	7,784	19.3	-8.9
ITC	69,700	14.5	3.8	17,680	16.8	10.4
Marico	11,500	18	-9.2	1,074	37.2	-13.3
Nestle	22,750	15.9	14.5	2,954	10	21.6
Pidilite Inds.	8,450	19	-7.4	1,108	28.2	-16.9
United Spirits	19,700	10	-4.2	828	-2.3	-25.1