FMCG    
SECTOR | 25 Aug 2021
HDFC Securities
Unlike the previous year, rural demand was also impacted by the second wave impacting the aggregate demand. Categories that outperformed our index in Q1FY22 are OTC FMCG, F&B, home care, and oral care which grew 39/11/9/5% on two-year CAGR. Paints, personal care, hair care, dairy, QSR, cigarette, footwear, and liquor categories have underperformed, growing below the aggregate at 3/2/1/-3/-6/-7/-19/-19% two-year CAGR The HSIE consumer index sales reported a growth of 40% YoY in Q1FY22 (-23% in Q1FY21, +23% in Q4FY21) on a low base, impacted by the fresh restrictions due to the second COVID wave. Decreased mobility of consumers impacted OOH and discretionary demand. The two-year sales CAGR (which normalises all base adjustments over the past two years) in Q1FY22 was at 4% YoY (-8% in 1QFY21, +7% in Q4FY21). During the quarter, while mobility was impacted, industry commentary reaffirmed the strong demand for discretionary products. The second lockdown impact was relatively softer than the first waves.
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FMCG    
SECTOR | 23 Jul 2021
Up, up and away: How bad is the input costs spiral, and how is FMCG responding?

by Aakash Athawasya

This is Part 1 of a series on rising input costs. Read Part 2 on rising costs for the Cement Industry, and Part 3 on rising costs for the Auto Industry.

Early 2020 saw the pandemic and a standstill in economic activity, resulting in staggered ...

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FMCG    
SECTOR | 05 Jul 2021
Prabhudas Lilladhar
Consumer stocks have seen sustained re-rating since 2009, resulting in most stocks trading at life time high PE with life time high profit margins. We note that FY21 growth was driven by market share gains on the back of superior supply chain and distribution at expense of unorganized players. Although we believe that structural drivers led by strong rural demand outlook and gains from digitization and supply chain automation are positive, further rerating looks a daunting task. We remain structurally positive on HUL, Britannia, JUBI, TTAN and APNT, however return expectations need to be moderate. We rate D'Mart, NEST and KNPL as top picks in consumption...
FMCG    
SECTOR | 22 Jun 2021
What lessons have India's FMCG companies learned from Covid-19?

by Aakash Athawasya

Fast-moving consumer goods (FMCG) makers are back to square one in FY22. Even though the economy is opening back up, with discretionary sales being allowed, consumer goods companies are dealing with a situation much like last year’s.

Companies are hiking prices, altering product portfolios, switching from ...

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1 Comment
iamkalai Interesting to learn about companies using pharmacy for sales of their other products.
22 Jun 2021  Like
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FMCG    
SECTOR | 15 Apr 2021
HDFC Securities
We believe companies with higher revenue mix from rural will continue to benefit, although urban recovery will also play a key part in driving growth. Despite the recovery in MT, E-comm and GT have sustained their growth momentum. Companies with a strong presence in E-comm and diversified offerings are expected to outperform. FMCG sector has underperformed Nifty by ~35% in last 1 year, and we see a balanced risk-reward for the FMCG sector for FY22/FY23 with earnings led stock returns. Rich valuations and modest earnings growth profile leaves limited scope for PE re-rating. Aggregate revenue/EBITDA to grow by 19/26% YoY helped by base: Our FMCG coverage universe is expected to deliver growth of 19/28% YoY in revenue/ EBITDA (ex-GSK, 16/23%) in 4QFY21 (vs. -6/-9% in 4QFY20 and 10/5% in 3QFY21) with a QoQ growth of -3/+2%. Recovery in demand continued across segments. Increased mobility of consumers drove the demand for discretionary categories like discretionary PC, QSRs and beauty soaps, while health and hygiene categories saw growth moderation. Demand from metro cities and urban areas continued to improve and is likely to be a key monitorable over the next few months in wake of new partial lockdowns. Urban channels like MT saw gradual recovery. Rural and e-commerce demand continued to drive overall growth
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FMCG    
SECTOR | 07 Jan 2021
Prabhudas Lilladhar
Most companies to record growth in 3QFY21 3QFY21 performance is likely to show signs of recovery led by sustained rural demand and gradual pickup in urban demand post unlock and normalization of supply chain. We believe that margins for select players will start correcting QoQ given rising commodity costs and comeback of ad spends, marketing and Apart from Titan and ITC(Cigarettes), we expect volume growth across all companies. Due to improvement in consumer sentiment and declining covid cases,...
FMCG    
SECTOR | 08 Sep 2020
HDFC Securities
In the FMCG universe, Britannia, GCPL, Nestle, and HUL (including GSK) outperformed, clocking revenue growth of 27/5/3/4% YoY respectively. Packaged Food and Hygiene products continued to witness higher demand as the rapid increase in the number of coronavirus cases kept consumers cautious. However, we expect the benefit of pantry loading to reduce and growth to normalise for Packaged Food while expecting Hygiene to continue to post strong growth. Most companies have resumed normal operations from June and witnessed the benefit of pent-up demand. Rural growth has been ahead of urban, and this trend will sustain in FY21. However, we remain cautious and selective within the sector due to the unfavourable medium-term risk-reward, given modest absolute growth relative to expectations and valuations. Despite defensive characteristics, we are underweight on the sector in our model portfolio. We recommend BUY on ITC and ADD on UNSP, Colgate and Radico. The HSIE Consumer-Index sales declined by 19% YoY in 1QFY21 (+10% in 1QFY20 and -8% in 4QFY20) as lockdown and weak sentiments continued to weigh heavily on several categories. The three-year CAGR (which normalises all base adjustments over the past three years) in 1QFY21 was +2% YoY, supported by the healthy growth in the past two years. Categories which outperformed our index in 1QFY21 are F&B;, OTC FMCG, Home Care, and Oral Care, clocking 38/33/2/-5% YoY growth. The divergence between the underperforming and outperforming categories was much sharper as consumer purchasing was largely necessity driven. Footwear, Liquor QSR and Paints categories were impacted the most, contracting by 68/58/58/46% YoY.
FMCG    
SECTOR | 08 Jul 2020
IDBI Capital
As most of the economies are opening up and gaining momentum, demand for crude oil has also picked up amid tight supply as OPEC and Non-OPEC both cut its production level. Consequently, crude oil price (Brent) increased 29% MoM to average US$39.9/bbl. We expect oil price to remain in the broader range of US$35-45/bbl over the next quarter as demand would continue to be on a rising trend but higher price would bring back lost supply from US shale assets, which would keep price under check. However, on a medium to long-run we expect crude oil price to stabilise near US$50-55/bbl. OPEC cut its production level further to reach to the lowest level since May 1991 to 22.6mbpd vs 24.6mbpd in May'20 (30.4mbpd in Apr'20). Saudi Arabia was in a lead role with a production cut of 1.13mbpd MoM to 7.5mbpd in Jun'20 (11.6mbpd in Apr'20) while other countries saw a minor cut in production. This is in line with their commitment to bring down supply by 9.5mbpd which has further extended to Jul'20. We expect, if demand scenario doesn't improve much, production cut would be extended till year-end....
FMCG    
SECTOR | 30 May 2020
ICICI Securities Limited
The Indian consumer sector has been going through volatile times as the lockdown across the country, due to Covid-19, has disrupted the entire manufacturing, supply chain & retail operations. Though essential categories continue to see strong growth due to pre-buying or bulk buying, some discretionary categories witnessed a slack in demand conditions. New trends have also emerged with sanitisers, disinfectants & immunity booster products staring at exponential growth in next few years. Even distribution channels have been seeing a swift change with e-commerce & digital space...
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FMCG    
SECTOR | 13 Apr 2020

FMCG: Defensive businesses but not valuations

HDFC Securities
We downgrade rating on DABUR, BRITANNIA and EMAMI from ADD to REDUCE and UNSP from BUY to ADD. We also initiate coverage on NESTLE and GCPL with REDUCE rating. Within our existing coverage, we remain positive on ITC, UNSP, JUBI, COLGATE and RADICO. FMCG sector witnessed growth slowdown in FY20, in-line with nominal GDP moderation. Sector posted 5% revenue growth in 9MFY20 vs. 12% CAGR over the last 10 years. Covid-19 will further delay the macro recovery which was earlier expected in 1HFY21. In the current slowdown, while FMCG cos will be better than other sectors, however, their growth trajectory will also taper down. Staples consumption will see moderation in FY21 particularly with further weakness in income for rural and urban poor households. We believe street is not factoring volume hit and down trading risk in this sector and cos which are more resilient to near term disruption have already seen re-rating. Thereby, risk-reward has become unattractive for most stocks from medium term perspective. We remain selective in sector as extremely stretched valuations keep us on sidelines, esp. on large caps