• OUTLOOK ARENA
  • VIEWS ON NEWS
  • NOVEMBER 30, 2001

FMCG: Looking for the rural trigger

The consumer products sector has reported a much better performance in terms of turnover growth in the September quarter as compared to the June quarter this year. The sample of the top five companies in the sector reported a 7% turnover growth as compared to just over 2% growth in the June quarter.

(Rs m)Sep.QFY01Sep.QFY02Change
Net Sales30,98333,1677.0%
Other Income1,0111,35634.1%
Expenditure26,69528,4996.8%
Operating Profit (EBDIT)4,2884,6688.9%
Operating Profit Margin (%)13.8%14.1% 
Interest 546214.9%
Depreciation47960225.7%
Profit before Tax4,7675,36112.5%
Extraordinary items23175651.5%
Tax1,0011,17117.0%
Profit after Tax3,7894,36515.2%
Net profit margin (%)12.2%13.2% 
Effective tax rate (%)21.0%21.8% 
Diluted no. of Shares (m)2423.72423.7 
Diluted earnings per share*6.37.2 
P/E ratio 29.2 
(* annualised)   

The sample which includes Hindustan Lever (HLL), Colgate, P&G Hygiene, Reckitt and Gillette India has reported a 15% growth in bottomline. This was lower than the 17% growth reported in the June quarter.

The consolidated numbers bring out the sector's efforts to improve operating efficiencies. The operating margins for the September quarter have improved by a minor 30 basis points YoY. However, higher depreciation provisioning and interest burden has pruned bottomline growth. Higher depreciation and interest burden are largely contributed by Gillette India.

If we exclude the extraordinary items effect, then profit growth has been just over 11% YoY. The extraordinary items have largely been contributed by HLL. The FMCG major is also responsible for the better turnover growth showing this quarter.

The sample sector trades at a P/E of 29x annualised September quarter earnings and a market cap. to sales ratio of 3.8x. The sector's valuations are on the higher side as compared to other sectors. The defensive nature of the sector as well as its future growth potential are largely responsible for these valuations. Going forward, a lot would depend on how the demand picks up in the coming quarters.

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 (Research Analyst) bearing Registration No. INH000000537 (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, Canada or the European Union countries, 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 (Research Analyst)
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