FMCG Stocks Outlook for the week - 13 to 17.02.2017
FMCG Stocks Outlook for the week - 13 to 17.02.2017
( www.rupeedesk.in )
Fast moving consumer goods companies are seen gaining momentum next week, as these companies
have undertaken some price hikes post the Union Budget for 2017-18 (Apr-Mar). The price hikes have been led by ITC Ltd, which will reportedly increase the prices of its premium cigarettes by up to 14% in the coming days. This follows the Budget announcing a hike in the excise duty on tobacco and tobacco products. We expect 2.5% volume growth and 15% cigarette EBIT (earnings before interest and taxes) and EPS (earnings per share) growth in 2017-12 (Apr-Mar). Mid-teens EPS growth after two years of single-digit EPS growth, coupled with second consecutive year of volume growth, keeps us positive despite 40% stock price appreciation since the last Budget. The impact of demonetisation has faded away for most sales channels, with most companies reporting an improvement in sales so far this quarter ending March. Though expansion in margins has slowed for most FMCG companies, the situation is expected to normalise by the end of the month. The next financial year starting April would be much better in terms of volume and value growth, and margins of 20% would be maintained in the domestic business. New launches by companies would also be keenly eyed in the near term. With recovery in urban growth on the cards coupled with the above factors, Marico is set to gain. Recovery in rural growth will further help Marico take steps to enhance penetration in rural areas.
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FMCG Stocks Outlook for the week - 13 to 17.02.2017
( www.rupeedesk.in )
Fast moving consumer goods companies are seen gaining momentum next week, as these companies
have undertaken some price hikes post the Union Budget for 2017-18 (Apr-Mar). The price hikes have been led by ITC Ltd, which will reportedly increase the prices of its premium cigarettes by up to 14% in the coming days. This follows the Budget announcing a hike in the excise duty on tobacco and tobacco products. We expect 2.5% volume growth and 15% cigarette EBIT (earnings before interest and taxes) and EPS (earnings per share) growth in 2017-12 (Apr-Mar). Mid-teens EPS growth after two years of single-digit EPS growth, coupled with second consecutive year of volume growth, keeps us positive despite 40% stock price appreciation since the last Budget. The impact of demonetisation has faded away for most sales channels, with most companies reporting an improvement in sales so far this quarter ending March. Though expansion in margins has slowed for most FMCG companies, the situation is expected to normalise by the end of the month. The next financial year starting April would be much better in terms of volume and value growth, and margins of 20% would be maintained in the domestic business. New launches by companies would also be keenly eyed in the near term. With recovery in urban growth on the cards coupled with the above factors, Marico is set to gain. Recovery in rural growth will further help Marico take steps to enhance penetration in rural areas.
