Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
FMCG: 4QFY06 and beyond - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Apr 17, 2006

    FMCG: 4QFY06 and beyond

    The time has come for corporate India to unravel their March quarter results, and amongst the most awaited is that of the FMCG sector. The sector is often referred to as the 'Sun' and the 'Moon', from the perspective of everlasting demand for consumer products. In our view, the March quarter results will reinforce the underlying robustness in demand for consumer products. We have listed some of the major growth drivers for the sector in this article.

    Topline - Watch out for volume and value growth: Growth momentum is likely to sustain in the quarter, backed by increased consumer demand from both urban as well as rural markets. Besides demand, prices have gone up. Increased disposable income has also resulted in select consumers moving up the value chain (basically, upgrades). It can be recollected that growth in the month of February 2006 for FMCG products, on a YoY basis, was the highest in the past 5 years. Though prices hikes are good, we believe that FMCG is a volume-driven business. In the forthcoming quarterly results, investors should watch out for both value and volume growth (value growth was non existent the same quarter last year on a broader scale).

    Godrej Consumer Products is expected to maintain strong growth momentum, due to its presence in hair colours (the fastest-growing FMCG product). Given the fact that the company has managed to increase its market share from 9% in 3QFY06, soaps should also propel growth (as per media reports, the market share in 4QFY06 was 10%). Also, the 'Keyline' acquisition will also reflect in the numbers in the current quarter. Looking beyond Godrej Consumer, in our view, HLL will sustain its double-digit growth at the topline level in 1QCY06. Though we have commented only on two companies, at the broader level, we are positive about the topline growth prospects of the sector over the next three to five years.

    Margins Positive outlook: As far as margins are concerned, in our view, the so-called 'price wars' are a thing of the past. In fact, companies like HLL recently increased prices again (the third price in the last 12 months), indicating that the pricing power has returned. Hence, we anticipate margins to expand for almost all companies, some aided by enrichment of the revenue mix, while some due to fiscal benefits (savings in excise and income tax from new plants in tax heavens). In the long-term, margin expansion prospects will be governed by the intensity of competition and economic performance.

    What to expect?
    While we have outlined the major growth drivers for the FMCG sector, as far as the stocks are concerned, we reinforce the need to have a long-term while investing in FMCG stocks. One must also take into account the fact that valuations are not that attractive at current levels.

    Higher penetration levels (breadth) and increased per-capita consumption (depth) will influence the performance of the sector. By breadth, we mean the number of people buying FMCG products (from the organised sector as well as from rural markets). By depth, we mean, higher consumption by the existing consumer base (both in terms of moving up the value chain and increased usage). The FMCG sector, therefore, is a play on 'India's consumption story', for which things are looking up.



    Equitymaster requests your view! Post a comment on "FMCG: 4QFY06 and beyond". Click here!


    More Views on News

    Marico: Earnings Hit by Lower Volumes and Firming Input Prices (Quarterly Results Update - Detailed)

    Aug 9, 2017

    While GST implementation brought down volumes and profitability in the short run, Marico remains optimistic in the long run.

    P&G: Strong Core Growth (Quarterly Results Update - Detailed)

    Dec 9, 2016

    Procter & Gamble Hygiene and Health Care has announced the first quarter results of the financial year ended June 2017 (1QFY17). The company's sales rose by 12.5%YoY while net profit rose by 50.1% YoY during the quarter.

    Nestle India: Sales Traction From New Products (Quarterly Results Update - Detailed)

    Nov 30, 2016

    Nestle India declared results for the quarter ended September 2016. Here is our analysis of the result.

    GSK Consumer: Price Hike Hurts Volumes (Quarterly Results Update - Detailed)

    Nov 30, 2016

    GSK Consumer Healthcare declared results for the quarter ended September 2016. The revenues dropped by 1.3% during the quarter as compared to a year ago; while the profits declined by 16.6% YoY during the quarter.

    Marico: Margin Expansion Drives Profit Growth (Quarterly Results Update - Detailed)

    Nov 28, 2016

    Marico has reported a flat topline while the bottomline has grown by 18% YoY during the quarter.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 21, 2017 (Close)