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We believe investors will wait for monsoons to set in before they take a call on investing further in stocks of fast moving consumer goods companies. A normal monsoon is important to FMCG companies as a large portion of their sales comes from rural India, where incomes are significantly dependant on agriculture, and that hinges on good rains.
Rural incomes are largely dependant on agriculture, which in turn depends on the monsoons; hence a good monsoon is very important for companies like HUL and Dabur that get 45-50% of their sales from rural areas. India's largest oral care company Colgate Palmolive (India) Ltd is scheduled to detail its Jan-Mar earnings on May 28.
Colgate is expected to post a profit of 1.40 bln rupees, a 7% rise on-year for Jan-Mar, on the back of higher advertising costs. We expect the company to report sales of 7.97 bln rupees for Jan-Mar, up 16% over the same period last year, with volume sales estimated to grow at 8-10%. We expect FMCG stocks to be mute are bullish on most FMCG counters.
