Tag: FMCG sector

FY20 to be a lower growth year for FMCG sector, says Investec

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Financial services company Investec, in its latest report, said that the financial year 2020 will be a year of lower growth for the FMCG sector. It, however, believes that larger companies with scale, a diversified product presence and strong access to all distribution channels, will outperform.

“We factor a volume growth of 4-9 percent across companies in FY20 taking into account a lower volume growth in H1FY20 at least. The reasons for the broader slowdown are: 1) overall GDP growth slowing 2) rural stress across several regions 3) liquidity pressures in the supply chain impacting wholesale channel sales,” the report said.

“We believe that diversified plays that have a healthy rural market salience have a higher chance of surprising on volume growth and hence on earnings as rural volume growth recovers over the next few quarters,” it added.

The brokerage believes in the longer term, rural and middle India will grow significantly ahead of urban India in volume terms and will be the key drivers of industry growth. “Therefore, rural India remains the maker and breaker as tight liquidity are constraining the wholesalers and super stockists, which in turn results in lower primary sales at the brand level,” said Investec.

“Given the steady growth profile, higher than other sector cash conversions and return ratios, premium valuations for the sector are justified. Further, most of the companies in our coverage universe are trading at below peak valuations which gives us comfort that once growth recovers, a further re-rate is likely,” the report mentioned.

Investec initiated a ‘buy’ coverage on Hindustan Unilever, Dabur, ITC and Jyothy Labs, ‘hold’ on Godrej Consumer, Marico, Britannia, Emami and Nestle India, and a ‘sell’ call on Colgate Palmolive.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Here’s why JM Financial sees 63% upside potential in this smallcap FMCG stock

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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JM Financial has retained ‘buy’ call on Prataap Snacks Ltd as the consumer snacks company’s 1QFY20 results are quite encouraging. The brokerage firm sees a nearly 63 percent upside potential in the stock at a target price of Rs 1280 per share in the next four quarters.

Prataap Snacks quoted at Rs 787.50 per share on Tuesday on NSE at 2.20 pm, up from its Friday’s close of 785.65. The smallcap stock has corrected almost 25 percent year-to-date and 28 percent in the last one year.

JM Financial sees signs of recovery in salty snacks market and also notes the bullish commentary of the management in a research report.

“With improving revenue trajectory and benign RM prices, we expect stock performance to steadily improve from current levels. We maintain positive bias based on management’s sharp focus on driving high revenue growth rates through product innovation and expansion into adjacent categories,” the JM Financial research note said.

“This is in contrast to the commentary of other consumer companies which are citing slowdown in consumption,” it also added.

The snacks company reported revenue of Rs 330.99 crore, and delivered double-digit growth of 23.2 percent on a y-o-y (year-on-year) basis.

Its operating EBITDA (earnings before interest, taxes, depreciation and amortisation) of Rs 27.21 crore, translates to a margin of 8.2 percent. EBITDA for Q1FY20 (without the impact of IND-AS 116), at Rs 22.8 crore, was higher by 15 bps (basis points). The EBITDA margin was 6.9 percent.

PAT (profit after tax) stood at Rs 9.65 crore in Q1FY20. Diluted EPS (earnings per share) was at Rs 4.12 per share in Q1FY20. PAT for Q1FY20 (without the impact of IND-AS 116) at Rs 8.81 crore.

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Disclaimer: The CNBCTV18.com editorial team does not engage in speculative or active trading in stock markets and follows its Code of Conduct on securities trading and investment. Any investor/ viewer is advised to carry out necessary diligence on their own or through a certified registered financial advisor for investment decisions.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

FMCG sector in India is inching towards a slowdown, market research firm Nielsen warns

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Growth in India’s fast-moving consumer goods (FMCG) sector is slowing as households continue to squeeze spending,  market research firm Nielsen said, offering a gloomy barometer of the economy.

The drop in GDP is driven by the weakening of household spending which forms nearly two-thirds of the GDP for the country. There is a looming concern on increasing inflationary pressure,” Nielsen said,  quoting its retail panel data.

India’s GDP growth slowed to 5.8 percent from 6.6 percent in the previous quarter.

“FMCG growth for first half of 2019 stands at 12 percent as against a prediction of 13 to 14 percent. This is in line with our forecast of a healthy double-digit predicted for H1 2019 albeit 1 percent lower than our forecast,” Nielsen said.

The growth outlook for the next quarter stands at 7 to 8 percent and for the second half of the year at around 8 percent, the report said.

Nielsen listed four key factors impacting the growth of FMCG sector:

• Macroeconomic factors: FMCG growth trends generally move in the opposite direction of inflation trends, it said, adding, “Inflation is expected to inch up closer to the 4 percent mark as the year progresses. It has already, from a low of 1.97 percent in January 2019, moved to 3.18 percent as on June 2019.” Talking about the impact of GDP on FMCG’s growth, Nielsen said, “While the forecast for GDP available stands still at 6.8 percent in 2019, this is still lower than 2018. Budget implications will impact this metric and the overall growth
  story.”
• Monsoons: Over the next few months, monsoons are expected to intensify and there will be an impact on the growth seen in subsequent quarters.
• Government policies: Budget announcements like income tax rebate for incomes up to Rs 5 lakh and Mudra loans of Rs 1 lakh for women could boost disposable income at the individual level.
• Low-base effect: Nielsen said, impact of a high base especially in second half of 2018 to the tune of around 16 percent will have a reverse impact in 2019 and we expect this to be in high single-digit range.”

Nielsen said FMCG value growth in the second quarter of current calendar year dropped to 10 percent as against the highs of 16.2 percent in the third quarter of last year. It said, “The FMCG growth trend is majorly dampened by volume-led growth which has also moved 3.6 percentage points down from 9.9 percent in first quarter of this year to 6.2 percent in second quarter.”

Detailing  the reasons for this inching slowdown in the FMCG sector, Nielsen said the two main contributors to the overall slowdown are sales in rural India losing steam and fading advantage of small manufacturers.

It said, “Rural India Contributes to 37 percent of overall FMCG spends and has historically been growing around 3 to 5 percent points faster than urban on account of increasing affordability, availability, and demand. However, rural
growth is slowing down double the rate of urban in recent quarters.”

Slowdown, the report said, is driven by North and West zones. Haryana, Madhya Pradesh, Uttar Pradesh, Maharashtra, and Assam are leading the slowdown, Nielsen study said.

On the small manufacturers, it said, net manufacturer exits have increased from a 4300 in third quarter of last year to 5800 in second quarter of this year while new entrants in the FMCG space have reduced from  around 8000 in the same period to 6000 in this year’s second quarter.

Nielsen said, “Inflationary pressures along with change pack price architecture within small players has resulted in small players losing price advantage to large manufacturers.”

The report further said, “The Foods basket which is a critical segment for small manufacturers with 70 percent contribution, has witnessed a massive drop from 28 percent (Q3’18) to 14 percent in (Q2’19). Within Foods, discretionary & impulse categories like Salty Snacks, packaged tea, biscuits, and Spices cumulatively contribute to 57 percent of the slowdown for small manufacturers within Foods.”

Nielsen said, “The degree of decline in growth for small manufacturers has resulted in an overall contribution of 50 percent to India’s slowdown
story.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

FMCG Q1 Earnings Preview: Another washout likely as consumer sentiment remains weak

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Q1FY20 is likely to be another washout quarter for the fast-moving consumer goods (FMCG) sector owing to weak consumer sentiment further impacted by the general elections and continued weakness in rural India.

The pace of growth in rural India has moderated from 1.7-1.8X urban growth some quarters ago to same as urban growth currently. Barring some margin expansion owing to lower crude prices, not much is expected to change in Q1FY20 from Q4FY19. In fact, majority of the street believes even Q2FY20 is likely to be a quarter of low growth.

Most companies in Q1 are expected to report volume growth in mid-single digits. Cookie major Britannia & Hair Oil to health food major Marico are likely to outperform with 6-6.5 percent growth, while Fevicol maker Pidilite may disappoint for another quarter in a row due to unavailability of carpenters during general elections. In segments such as detergents, there have been some price hikes which will mitigate a deep dent in revenue due to lower volume growth.

Management commentaries ahead of quarterly result from Godrej Consumer, Marico and even Titan have been circumspect.

From an investors’ standpoint, most FMCG stocks have cooled from record-high valuations. However, at an average of 41X FY21e PE, they’re still far from comforting. All hopes are now pinned on H2FY20 where monsoons, festive season and government hand-outs may spur some demand for consumer staples and discretionary products.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Wipro Consumer Care continues to explore organic, inorganic growth strategy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Wipro Consumer Care & Lighting, a USD one billion dollar plus firm, will continue to scout for acquisitions in the FMCG sector in domestic and South Asian markets besides growing organically as part of its growth strategy, a top company official said.

Besides, the company, which owns brands such as Santoor and Chandrika, is expanding its footprints in the north and east regions and is also increasing its product portfolio. It has a good presence in the southern and western India.

Wipro Consumer Care & Lighting is also leveraging its Ayurvedic soap brand Chandrika to cash in on the current trend of organic products in FMCG segment and has plans to introduce more in the market under the brand name.

“We have already extended (Chandrika) to handwash, face wash and hair oil. Now we are leveraging that equity in more categories as the trends picks up,” Wipro Consumer Care & Lighting president Consumer Care – India & SAARC Business Anil Chugh said.

Founded in 1945 as a vegetable oil company, Wipro Consumer Care & Lighting has now presence in over 40 countries and has done 11 acquisitions in last 15 years to expand its business. The company as part of its growth strategy, is banking on both – organic and inorganic growth.

“Its a mix of both –organic and inorganic growth plan – which we want to pursue,” said Chugh. On being asked as whether the company evaluating the opportunities for inorganic growth, Chugh said: “Yes, we keep on doing”.

Some of the acquisition by the company includes – Glucovita in 2003, Unza in 2007, Yardley (for Asia, Middle East, North Africa and Australasia) in 2009, Yardley UK in 2012, and LD Waxsons Group in 2012, Zhongshan Ma Er Daily Products Ltd in 2016.

Wipro Consumer Care & Lighting has “fairly big presence” in countries like China, Malaysia, Indonesia, Vietnam and the Middle East, apart from India, he added.

It reported annual revenue of Rs 7,150 crore last year, and has a growth rate close to 8 percent.

According to Chugh, the company would focus on South Asian markets and the emerging nations besides the domestic market.

“The plan is to grow in all the countries,” he said, adding “our objective is to grow higher than the market growth rate and in India specifically, the categories where we are in, we want to gain market share…”

It has plans to “consolidate the position in personal wash – where we are fairly big and continue to gain shares there,” he said.

“Santoor is a big brand and we have leveraged Santoor equity in lot more categories such as handwash, bodywash, talcum powder. We will continue our game plan of organically and inorganically, and we would consolidate our position,” he said.

It will also consolidate its position in homecare with its brand Softouch and Safewash.

The company has also presence in the lighting space in the Indian market only.
Wipro Consumer Care business operates in segments such as soaps, toiletries, personal care products, wellness products, electrical wire devices, domestic and commercial lighting and modular office furniture.

Wipro Consumer Care & Lighting has 16 manufacturing facilities in five countries – India, China, Malaysia, Indonesia and Vietnam.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Low rural demand bites FMCG sector in March quarter

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The fast-moving consumer goods (FMCG) sector is the only space that can never go out-of-demand. It is a  consistent sector considering the fact that people are never really going to stop using soaps, shampoo, hair oil and other products in their daily lives. However, this year has not been that great for consumer staples. The once-upon-a-time fast moving sector has rather become a slow-moving sector due to low demand in the rural market.

Volume growth was the first sign of stress during the March-quarter results. India’s biggest FMCG company Hindustan Unilever reported a volume growth of only 7 percent, which was a worrying dip. The FMCG giant before Q4FY19 has posted a double-digit volume growth in the preceding five quarters.

ITC, next big FMCG giant, also reported a single digit volume growth during the March quarter indicating low consumption. However, it worsened when Godrej Consumer Products announced the volume growth of a mere 1 percent for Q4FY19. Only two companies came up with double-digit growth i.e. Nestle and Dabur. Both these FMCG major also gave good returns of 35-45 percent.

After Nifty Bank, Nifty Financial Services and Nifty Realty, valuation of the Nifty FMCG index was the most expensive among the NSE sectoral indices as of May 31. Among the major FMCG stocks, ITC is the least expensive stock trading 28 times to its current market price, while others are trading at a P/E of 40-63x.

Coming to debt/equity (D/E) ratio, Hindustan Unilever has D/E of 1.33x which poses as a higher risk. This indicates that the FMCG giant is aggressively financing its growth with debt. D/E ratio is often used in gauging the extent to which the company is taking on debt as a means of leveraging its assets.

The company that is placed most comfortably in terms of D/E ratio is ITC followed by Marico, Godrej Consumer Products, Britannia and Dabur.

Furthermore, all FMCG companies in this Q4FY19 presented a double-digit net profit growth except Godrej Consumer Products and Marico. Marico registered the highest net profit growth at 258 percent YoY, and Godrej reported net profit growth of 207 percent YoY.

Hindustan Unilever looks like a risky but a profitable bet as it trades at the highest P/E along with highest RoE and even higher D/E ratio. Meanwhile, ITC looks like a safer bet with the lowest P/E and decent returns of 20 percent with the lowest D/E ratio.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Budget 2019: FMCG companies cheer rural spending, consumption boost

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The government on Friday announced a slew of reforms for the rural India, which is likely to provide the much needed thrust to the fast moving consumer good companies.

Finance Minister Piyush Goyal, in his interim Budget 2019 speech, announced the Prime Minister Kisaan Samman Nidhi scheme. Through the scheme, farmers holding up to 2 hectare of land will be given Rs 6,000 per annum via direct income support. The money will be transferred in three equal installments of Rs 2,000 each.

The FMCG and retail industry see this as a positive development in the short to medium term as it will bring more money in the hands of the consumers. Industry players are terming this as a “consumption oriented” Budget.

“Overall, this is a ‘consumption first’ budget that will provide a much-needed thrust to growth in the FMCG sector. It re-emphasises the aam aadmi at the heart of the Government’s pro-growth, pro-reform agenda,” Vivek Gambhir, managing director and CEO of Godrej Consumer Products said.

Sunil Duggal, CEO of Dabur, echoed similar views.

“Not only does he promise to put more disposal income in the pockets of Middle-Class India, he is also seeking to improve the quality of life of people at the bottom of the pyramid, particularly the small and marginal farmers, and unorganized sector workers. In short, it a great Budget for that should spur consumption,” said Duggal.

Demonetisation as well as the implementation of GST hurt the spending power of the middle class as well as the rural sector in the last two years, according to market experts.

Weak macroeconomic indicators have furthur compounded their worries. Insufficient rainfall in some pockets and sluggish wage growth have negatively impacted growth in rural areas in the last couple of years.

About 65 percent of Indians live in villages and small towns. This demographic, the biggest market for India’s consumer companies, is now dependent on the government’s generosity for a sustained demand recovery.

The government’s focus on rural reforms will help uplift the prospects of the retail industry and boost the overall spending levels. Initiatives like MGNREGA, PMGSY, focus on electrification of villages will also play a role in development of infrastructure and raise the standard of living in rural India.

“The Interim Budget proposals should augur well for the Indian economy by providing a growth impetus through a boost in consumption as well as an inclusive framework designed to benefit agri and rural communities, unorganised sector workers as well the middle class,” said Sanjiv Puri, Managing Director, ITC.

Marico MD Saugata Gupta sees today’s Budget as a positive for the industry, as it will result in “more income for marginal and small farmers and more money to middle class to boost FMCG consumption”.

The government also raised the personal income tax slab limit to Rs 5 lakh from current Rs 2.5 lakh and raised the standard deduction for salaried employees.

“This will increase disposable income for middle and salaried classes and drive demand for mass products,” said Gambhir from Godrej Consumer Products.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow