FMCG: Much to look forward to - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

FMCG: Much to look forward to

Nov 8, 2000

In the quarter ended September 2000, the fast moving consumer goods (FMCG) sector gave signs of slowing down. The consolidated numbers of the top 10 FMCG companies in India, saw a staid 5% growth in turnover. The sample includes Britannia, Colgate, Cadbury, Hindustan Lever, Indian Shaving, Nestle, P&G Hygiene, Reckitt, Smithkline Consumer and Tata Tea.

(Rs m)QSep00QSep01Change
Other Income1,1161,25612.6%
Operating Profit (EBDIT)6,0836,71410.4%
Operating Profit Margin (%)14.0%14.7% 
Interest 1801874.0%
Profit before Tax6,2947,07912.5%
Profit after Tax/(Loss)4,6055,28814.8%
Net profit margin (%)10.6%11.6% 
No. of Shares (eoy) (m)675.8675.8 
Earnings per share* (Rs)27.331.3 
Market cap to sales ratio (X) 3.1 

If we were to remove HLL's results from the sample, the turnover growth would reflect an 11% growth. This is not suprising as this FMCG giant, which contributes almost 56% to the sample's turnover, saw a poor 0.4% growth in turnover during the quarter.

A slowdown in demand from the rural areas, as a result of bad monsoons in some states was largely responsible for the staid growth in turnover.

The consolidated net profit of these companies was up by 15% to Rs 5.3 bn. Notwithstanding the sluggish growth in turnover, the sector sample saw operating margins improve by 70 basis points to 14.7%. The debt servicing costs were up marginally, indicating that the FMCG sector is looking to prune its debt burden.

The depreciation costs on the other hand, surged 64%. This indicates that these companies are making new investments, underlining their confidence in the sector's future growth potential. Consequent to these results, the sample has managed to increase its EPS to Rs 31.3.

The sector is valued at a P/e multiple of 27 times its annualised September quarter earnings. The sample's market cap to sales ratio works out to be 3.1 times, which is more or less in sync with historical valuations (as on March 2000).

On the whole, it was a reasonable performance from this sector. Future growth prospects depend largely on demand from the rural segment. Further, India's GDP has shown signs of improvement, even in adverse conditions like the crude oil concerns. We believe that the sector has much to look forward to, in the near and the long term.

Equitymaster requests your view! Post a comment on "FMCG: Much to look forward to". Click here!


More Views on News

What Happens if ITC Hives off ITC Infotech? (Views On News)

Nov 20, 2021

The cigarette to hotel conglomerate is reportedly mulling the demerger of its software business at a valuation of around Rs 250 bn.

What Sparked an 8% Rally in ITC Shares Today? (Views On News)

Sep 16, 2021

ITC did not participate in the rally after the second wave and continued to underperform its peers. Is this about to change?

HUL's Marketcap Tops Rs 6 Tn. Key Factors Driving the Stock (Views On News)

Aug 21, 2021

HUL became the fifth Indian company to achieve the milestone of a Rs 6-tn market capitalisation.

Adani Wilmar IPO to Hit the Market Soon. Should you Apply? (Views On News)

Nov 29, 2021

The parent company of the brand Fortune is set to raise Rs 45 bn from the market.

Key Points to Know Before Applying to Dodla Dairy's Public Issue (Views On News)

Jun 14, 2021

What you should know before applying to Dodla Dairy's IPO.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

5 Indian Companies Embracing Blockchain Technology (Views On News)

Nov 23, 2021

Blockchain adoption in India was slow in the past. Now, the technology is being well received.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Dec 3, 2021 (Close)