Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

FMCG Sector Update - Recovery unlocked; lower growth divergence - HDFC Securities

Posted On: 2020-11-24 06:48:46 (Time Zone: Arizona, USA)


Mr. Varun Lohchab, Head Institutional Research & Mr. Naveen Trivedi, Institutional Research Analyst, HDFC Securities

The HSIE Consumer-Index sales indicated recovery with a growth of 1% YoY in 2QFY21 (+6% in 2QFY20 and -23% in 1QFY21) as easing of lockdown and resumption of economic activity supported demand. The three-year CAGR (which normalises all base adjustments over the past three years) in 2QFY21 was +7% YoY, supported by the healthy growth in the past two years. Categories that outperformed our index in 2QFY21 are OTC FMCG, F&B, Oral Care, Paints, and Haircare, clocking 50/13/8/6/5% YoY growth. The divergence between the underperforming and outperforming categories narrowed sequentially as growth in essentials moderated and discretionary demand saw improvement. QSR, Footwear, Liquor and Dairy categories were impacted the most, contracting by 30/27/16/3% YoY.

Within the FMCG universe, Dabur, Britannia, GCPL, Radico, Emami, and Nestle outperformed, clocking revenue growth of 14/12/11/11/11/10% YoY respectively. Growth in packaged food and hygiene moderated, although it continued to remain strong, following reduced fear among consumers and easing of restrictions. Discretionary demand witnessed substantial sequential improvement as increased economic activity and more instances of going out lifted sentiments. Rural growth has been ahead of urban due to lower restrictions, migration of labour & capital and healthy agri economy. We expect rural will remain strong in 2HFY21. 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.

Moderation for Essentials and Hygiene: Essential and Hygiene categories witnessed a moderation in growth rates as the quarter progressed. Easing of restrictions, reduced fear among consumers as well as lower pantry loading resulted in growth moderation. Consumers were more willing to step out of their homes, and instances of going out increased. Recovery in outside eating also impacted the growth of packaged foods. However, categories like immunity-boosting supplements and OTC healthcare products saw high demand as the awareness around health and hygiene remained high.

Discretionary and OOH improving: Discretionary and OOH categories indicated sequential improvement during 2QFY21, despite demand remaining muted. Higher instances of going out led to improved demand for discretionary personal care products. Categories like QSR saw sequential improvement in demand as consumers were willing to consume outside food. Cigarettes indicated a strong recovery towards the end of 1QFY21. However, the pace of recovery was impacted by localised lockdowns, although demand remained strong. Liquor companies witnessed recovery as increased home consumption helped recover sales lost due to continued closure of pubs.

E-commerce leading the way: E-commerce continued to grow ahead of all other channels and most companies saw significant improvement in revenue salience. GT also clocked a strong recovery. However, MT continued to struggle despite sequential recovery as consumers remained unwilling to venture into large, crowded areas. The recovery across channels was driven by semi-urban and rural markets as higher restrictions impacted the recovery in urban markets.

Near-term outlook: Consumer offtake has indicated rapid improvement in demand during 2QFY21. We expect demand for discretionary categories to return to growth over the next few months. Packaged foods and Hygiene growth are expected to moderate, although it will remain higher than other categories. Recoveries in QSR, liquor and discretionary personal care are expected to be healthy but the return to normalcy may be slower than in other categories. Winter portfolio is also expected to perform well in 2HFY21.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Maintain ADD on Mindtree - Into another operating orbit - HDFC Securities

NBFCs Q3FY21 Results Preview - Micro headwinds > Macro tailwinds - HDFC Securities

Mindtree - Margin beat and raise cycle seems to be over! - ICICI Securities

Shoppers Stop - Focusing on omni-channel growth - ICICI Securities

Piramal Enterprises - Strategic synergies, optional value to follow DHFL's buyout - ICICI Securities

Motherson Sumi Systems - Focus remains on growth and cost efficiency - ICICI Securities

Metropolis Healthcare - Acquires Hitech Diagnostics in South India - ICICI Securities

Nifty PE shifting orbits - ICICI Direct

Rallis India Ltd - Q3FY21 First Cut - ICICI Direct

Q3FY21 Company update - GTPL Hathway - ICICI Direct

Q3FY21 Result update - HDFC Bank - ICICI Direct

Q3FY21 Result Update - PVR Ltd - ICICI Direct

Q3FY21 Result update - HCL Technologies - ICICI Direct

Maintain BUY on HCL Technologies - Mode-2, 3 driven momentum - HDFC Securities

HDFC Bank Q3FY21 Results - Concall Highlights and Views of YES SECURITIES

HDFC Bank Q3 FY21 - 'Stellar Show' - Retain BUY and raise 12m PT to Rs1870 - YES Securities

IPO Review - Indian Railway Finance Corporation (IRFC) - ICICI Direct

HCL Technologies - Q3FY21 First Cut - ICICI Direct

Logistics Sector Update - Indian Railways - getting aggressive - HDFC Securities

Indigo Paints - IPO view - YES SECURITIES

Infosys - Near-term margins will likely come under pressure - ICICI Securities

CESC - 7% dividend yield + higher ESG rating - ICICI Securities

South Indian Bank - Unveils vision 2024; targets RoA / RoE of 1% / 13% by 2024 - ICICI Securities

Maintain BUY on Infosys - Growth certainty on explosive deal wins - HDFC Securities

Maintain ADD on Wipro - Growth acceleration - HDFC Securities

Consumer Durables - Q3FY21 Results Preview - HDFC Securities

Q3FY21 Company Update - Filatex India - ICICI Direct

Q3FY21 Result Update - Wipro Ltd - ICICI Direct

Q3FY21 Result Update - CESC - ICICI Direct

Monthly Inflation - December 2020 - ICICI Direct

Q3FY21 Result Update - Infosys - ICICI Direct

Banks Q3FY21 Results Preview - Scope for optimism beyond a tepid 3Q - HDFC Securities

Consumer Discretionary Companies - Q3FY21 Results Preview Report - HDFC Securities

Pharma Sector Update - Ample catalysts to sustain luster - HDFC Securities

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on IIP data

Infosys - Q3FY21 First Cut - ICICI Direct

Wipro - Q3FY21 First Cut - ICICI Direct

HDFC Securities - Real Estate Q3FY21 Results Preview - Has COVID triggered a new cycle?

Industrials Q3FY21 Results Preview - Normalisation done, growth awaited - HDFC Securities

FMCG & Alco Bev - Q3FY21 Results Preview - HDFC Securities

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on December 2020 CPI Data

Cement & Building Materials (Tiles) - Results Preview - Robust Performance on Improved Volume - Reliance Securities

Automobile & Auto Ancillary - Results Preview - Strong Results on Healthy Volume Performance in 3QFY21 - Reliance Securities

Q3FY21 Result Update - Tata Consultancy Services - ICICI Direct

Q3FY21 Result Preview - Real Estate & Infrastructure - ICICI Direct

Q3FY21 Result Update - Avenue Supermarts - ICICI Direct

Q3FY21 Result Preview - Metals & Mining - ICICI Direct

Insurance and Capital Markets Companies Q3FY21 Results Preview - Stronger earnings expected across sectors - HDFC Securities

Capri Global Capital - Getting back to normalcy - ICICI Securities

Avenue Supermarts - Fast recovery; there are speed breakers though - ICICI Securities



Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020