FMCG stocks in the limelight

Thu, 21 Oct 01:30 pm

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Indian indices continued their upward journey on the back of buying interest in heavyweights during the previous two hours of trade. Stocks from FMCG and oil & gas spaces are seeing the maximum buying interest while those from the IT and auto sectors are seeing the minimum.

The BSE-Sensex is trading up by around 300 points while NSE-Nifty is trading 90 points above the dotted line. BSE-Midcap is up by 1.1% while BSE-Smallcap index is 1% above yesterday’s closing. The rupee is trading at 44.37 to the US dollar.

FMCG stocks are trading firm led by HUL and Dabur. Pidilite announced its 2QFY11 results yesterday. The company’s standalone net sales grew by 15% YoY. This came on the back of robust performance by its consumer & bazaar products and industrial products segments. While the former grew by 16% YoY, the latter recorded a growth of 19% YoY during the quarter. Operating margins dipped by 3.4% to stand at 21.1% during the quarter. This was a result of increase in raw material costs and higher other expenditure (both as percentage of sales). However, fall in staff costs (as percentage of sales) provided some support to the operating margins. Pidilite’s net profit fell by 3.4%. This was a result of lower operating income as well as higher effective tax rates.

Auto stocks are currently trading firm led by TVS Motor, Maruti Suzuki and Tata Motors. During the month of September 2010, M&M reported domestic scooter sales volumes of 16,569 units, which was higher by 451% YoY. For the year till date, the company has sold about 70,800 scooters. On excluding the domestic sales volumes of the month of September, the average sales per month stand at a little over 10,800 units. As such, the sales in the month of September remain quite strong. During the month, M&M’s domestic market share in the scooter segment stood at about 10%. During the year till date, the company’s market share in this segment stood at over 7%.

It must be noted that the scooter segment forms nearly 17% of the total domestic two-wheeler industry. Considering that the demand for two-wheelers is much higher than the supply at present, most of the players have long waiting periods on their products. It is quite possible that M&M would have been able to capitalise on the same, and therefore this could have been a reason for the volumes to shoot up.