Consumer Durables share price target

revenue increased 7% YoY to INR6.3b (in-line), mainly led by 7% YoY growth in print business. Recovery in FMCG and education category adspend drove modest 5% YoY growth in print ad revenue. Circulation revenue grew at a healthy 10% YoY to INR1.3b, driven by higher circulation copies, while radio revenue grew at a muted 2% YoY. However, rising newsprint prices, coupled with higher circulation copies, led to an increase in RM cost by 28%, pulling down consol. EBITDA to INR1.7b (-10% YoY, 10% miss). EBITDA margin shrank 490bp YoY to 26.6%. PAT declined 11% YoY to INR976m (15% miss). 2QFY19 ad revenue should increase led by a low base. (2) FY19 circulation revenue should grow in double-digit.

Our top picks in FMCG: ITC, Jubilant FoodWorks and Marico Our top picks in Appliances: Havells, Crompton and Symphony FMCG companies continue to enjoy favorable base: Our FMCG coverage universe is expected to register 10/13% YoY revenue/EBITDA growth during 4QFY18 vs. 12/16% YoY in 3QFY18 and 8/9% YoY in 4QFY17. Consumer offtake is gradually improving with normalising distribution channels (post GST). Therefore, along with a favorable base (also in 1QFY19), FMCG companies would be able to accelerate revenue growth. Macro economic factors are improving steadily and further gains are expected on account of govts focus on agricultural & rural incomes. Rural used to grow 2.5-3% faster than Urban but the delta has now narrowed down to ~1.5%. Management commentary also suggests green shoots in the rural economy and a pickup in demand. International business is expected to recover due to improving consumer confidence index for key geographies and favorable base (geo-political issues, unfavorable currencies). Outliers : Jubilant FoodWorks, Britannia, Colgate, HUL

Our pecking order is ITC, Jubilant FoodWorks, Marico and Dabur FMCG universe recovered sharply by posting revenue/EBITDA growth of 13/17% in 3QFY18 on account of favorable base (2/1%), stabilizing trade channels (wholesale & CSD) and initial signs of rural recovery. The performance on an ex-ITC basis was even stronger at 15/23%, respectively. EBITDA growth was driven by favorable base, soft commodity inflation, better pricing discipline, premiumisation and favorable operating leverage.

Mold-Tek Packaging (MTPL) in Q3FY18 posted consolidated revenues of Rs. 84.9 Cr. (up 25% YoY) due to robust 16% volume growth led by higher contribution from Food & FMCG segment. EBITDA during the quarter stood at Rs. 15 Cr up 57%/9% on a YoY/QoQ basis respectively.

Mold-Tek Packaging reported robust Q3FY18 result, as Consolidated Net revenue and Net profit increased by 24.8% and 84.6% yoy respectively. The topline increased due to strong growth in Food & FMCG and Lube segments. Also improvement in operational margins resulted in better than expected profit.

ZEELs Q3 domestic ad revenue grew 30% YoY (our estimate of 20%) on strong ad spends across national/ regional markets and across sectors. This is also visible in 25% YoY rise in ad spends of Indias largest FMCG player (HUL) in Q3

Our top picks in FMCG: ITC, Marico and DaburOur top picks in Consumer Appliances: Havells, V-Guard, Crompton FMCG & Appliance universe in 2HFY18 is expected to recover primarily aided with a low base, recovering trade channels and buoyant consumer offtake (Urban & Rural). Our checks with channels and companies management suggest healthy recovery in the business. Trade channels (including Wholesale and CSD) have begun to normalize, witnessed a minor blip post GST rate revision (Nov17) for few products.

Our Top Picks: Based on the return potential, our pecking order is - ITC, Marico, Dabur, Jubilant FoodWorks, HUL, Britannia and Emami. FMCG sector has posted its slowest revenue growth at 4% CAGR in the last two years as compared to 13% CAGR in the last decade. The rural market has already had its share of challenges i.e. deficient monsoon in FY15 and FY16, low wage growth etc. It was further bruised with unprecedented events like demonet and GST. This led consumption growth dropping to its lowest in the last decade.

It was another dull day for the market as equity benchmarks closed flat amidst volatility on Thursday, tracking mixed global cues. While private banks, auto and FMCG stocks were under...

Our top picks in FMCG: ITC, Emami, HUL and Jubilant FoodWorks Our top picks in Consumer Appliances: V-Guard, Crompton Volume acceleration likely in 2QFY18: We expect a much-needed recovery in 2QFY18, owing to channel restocking and healthy underlying demand. GST implementation had impacted channel inventory during 1QFY18. Our checks with channels and companies management suggest healthy recovery in the business. Both FMCG and Appliances companies should register healthy volume growth. Recovery in the wholesale channel and rural market was slow, but encouraging in other channels (especially MT) and urban market. Recovery in the south and west regions was better than that in the east and north. While, International business is expected to remain subdued, owing to weak macros in key geographies and unfavourable currency movement. We expect improvement in EBITDA margin for our universe led by price hike and favorable operating leverage. We expect the FMCG and Appliance universe to register revenue/EBITDA growth of 7.2/9.6% and 11.5/12.5% YoY, respectively during 2QFY18.