FMCG Stocks
Outlook for the week – 13 to 17.07.2015
(Negative bias next week)
( www.rupeedesk.in )
Stocks of fast moving consumer
goods companies may trade with a negative bias next week amid
weak broader market sentiment and
rising concerns over weak monsoon rains. After a good start,
monsoon rainfall in the country
has been below normal since the last 15 days, raising worries over
inflation. An uptick in inflation
could hit rural demand for consumer products.
Most FMCG companies declined this
week due to monsoon-related concerns and fall in broader
markets because of ongoing
economic problems in China and Greece. The CNX FMCG Index fell
1.8% in the current week.
A revival in rains may give some
positive support to FMCG stocks but valuations for most
companies are high currently and
hence a sharp upside is unlikely in the near term.
During Jun 1-Jul 10, the country
received 245.8 mm of rainfall, 2% below normal, data from the
India Meteorological Department
showed. For the next few weeks, stock-specific movement is likely
due to the Apr-Jun earnings season.
Hindustan Unilever will detail its results on Jul 21, while Godrej
Consumer Products will announce
results on Jul 29.
We expect modest acceleration in
volume growth (for consumer companies), some fade in price-led
growth, and sharp acceleration in
EBITDA/PAT (earnings before interest, tax, depreciation and
amortisation/profit after tax)
growth to around 20% YoY (year-on-year) levels (ex-ITC), led by
strong RM (raw material costs)
tailwinds.
