May 18, 2000|
FMCG stocks: Hit by the software fever
A number of stocks in the FMCG (fast moving consumer goods) sector are trading at or near their 52 week low. Yet, there are no takers. The euphoria surrounding TMT (technology, media and telecom) stocks in the past few months has adversely affected stocks in other sectors. FMCG stocks are one of them.
FMCG stocks are popular among investor as they provide good returns with minimal risk. The topline growth of the companies in this sector is highly linked to the economic growth. During FY00, India's GDP grew by 5.9% compared to 6.8% in the previous year. With the sustained growth in economic activity, consumer spending has increased, boosting the topline growth of FMCG companies.
These companies have maintained their excellent financial performance over the last few years. Stringent cost control measures have enabled them to improve their profit margins. Also the returns to shareholders (dividend and bonus) is increasing due to higher cash profits. Nothing seems to have changed. Except the valuations.
The table is reflective of the fact that current valuations are not comparable to the valuations enjoyed by the companies in the past.
|Avg. Market Cap. (Rs bn)
|Market Cap to Sales (x)
|Market Price to Book Value (x)
|Price / Earnings Ratio (x)
In the past companies like Nestle, Britannia and Cadbury enjoyed premium valuations due their high brand value. However, it seems that value of their brands is not reflected in their current market capitalisation. Moreover, it seems that the market is ignoring the fact that these companies have good growth prospects, given the large potential of the Indian market.
FMCG stocks are likely to be re-rated in time to come, once the perception of the investor changes. With TMT stocks having taken a beating, this is more likely to happen sooner than later.
More Views on News
Jun 20, 2017
While GSK consumer reported muted revenue growth, volumes are seen to be recovering.
Feb 8, 2017
ITC Ltd has announced third quarter results of the financial year 2016-2017 (3QFY17). The company has reported 4.7% YoY and 5.7% YoY growth in revenues and net profits respectively. Here is our analysis of the results.
Dec 7, 2016
ITC has announced second quarter results of the financial year 2016-2017 (2QFY17). The company has reported 8% YoY and 10.5% YoY growth in revenues and net profits respectively.
Aug 21, 2017
Should you subscribe to the IPO of Apex Frozen Foods Ltd?
Jun 8, 2016
ITC declared results for the quarter and year ended March 2016. During the year, the company's net revenues and profits rise by 1% YoY and 3% YoY respectively.
More Views on News
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
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.
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 10, 2017
Bitcoin hits an all-time high, is there more upside left?
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: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407