Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

FMCG Sector Update Report - Divergence narrows; refocus on core - HDFC Securities

Posted On: 2021-02-22 05:00:21 (Time Zone: Arizona, USA)

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

The HSIE Consumer-Index sales indicated a sustained recovery with growth of 7% YoY in 3QFY21 (+5% in 3QFY20, +1% in 2QFY21) as easing of restrictions and increased mobility of consumers boosted OOH and discretionary demand. The three-year CAGR (which normalises all base adjustments over the past three years) in 3QFY21 was +8% YoY (+10% in 3QFY20, +7% in 2QFY21), supported by the healthy growth of the past two years. Categories that outperformed our index in 3QFY21 are OTC FMCG, Paints, Hair care, F&B, Oral Care and Personal care, clocking 27/24/12/11/11/11% YoY growth. QSR, Cigarettes, Footwear, Liquor and Dairy categories were impacted the most, contracting by 10/6/8/3/2% YoY. The divergence between the underperforming and outperforming categories narrowed sequentially as growth in essentials moderated and OOH and discretionary categories returned to a growth trajectory. Companies are refocusing on core strengths (product innovation, distribution expansion, cost and capital efficiencies). In our recent thematic (Opportunity in Adversity- A Comparative Scorecard), we shared the company-wise strategic initiatives of the past five years to drive core.

Within the FMCG universe, Marico, Dabur, Emami, GCPL, and Nestle outperformed, clocking revenue growth of 16/16/15/11/10% YoY. Growth in essential categories continued to moderate as easing of restrictions led to reduced fear among consumers. Increased mobility and improved sentiment supported discretionary demand, which returned to a growth trajectory. Rural growth remained ahead of urban, although most companies saw strong recovery in urban markets. We expect urban and discretionary demand to drive growth over the next few months. However, we remain cautious and selective within the sector due to an unfavourable medium-term risk-reward, given only 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 Dabur, GCPL, Marico, UNSP, Colgate and Radico.

Essentials decelerated, Healthcare sustained: Growth for essential and hygiene categories continued to moderate sequentially. Easing of restrictions, reduced fear among consumers, and lower pantry loading led to growth moderation. Increased economic activity as well as mobility led to higher instances of going out, impacting in-home consumption. Continued recovery in outside eating also impacted growth of packaged foods. However, demand for categories like immunity-boosting supplements and OTC healthcare remained elevated as awareness around health and hygiene remained high.

Discretionary and OOH bounce back: Discretionary and OOH witnessed consistent sequential recovery as more instances of going out improved demand. Categories like QSR saw sequential improvement in demand as consumers were willing to eat outside. Cigarettes' recovery continued with an improved product mix, although the category remained below FY20 level. Liquor companies witnessed recovery due to increased home consumption and reopening of pubs.

E-commerce and rural leading the way: E-commerce continued to grow ahead of all other channels, despite strong growth in GT and recovery in MT. Most companies significantly improved in e-comm revenue salience (2x-3x mix in FY21). The recovery across channels was mainly driven by semi-urban and rural markets while that in urban markets was gradual. However, urban returned to growth for most companies and the sequential recovery was encouraging.

Near-term outlook: Consumer offtake has indicated rapid improvement in demand and mean-reversion in category growth could sustain. Packaged foods and Hygiene will remain soft while OOH, discretionary categories and urban markets are expected to be the incremental drivers for the next few quarters. Success of new launches, distribution reach, price hike and improvement in international business will be the key monitorable.

Source: Equity Bulls

Click here to send ur comments or to

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., 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. 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:

Emerging Lenders Day - Conference Takeaways - YES Securities

Cement - Prices rise; earnings upgrade to continue - ICICI Securities

Affle India - Navigating privacy and technology challenges will be the key - ICICI Securities

IT Sector Investor Forum - Onwards and upwards - HDFC Securities Institutional Research Desk

Wipro - Beware of integration / impairment risks! - ICICI Securities

Easy Trip Planners Ltd - IPO Review - ICICI Direct

ICICI Direct - Derivatives Weekly View (March 5): Level of 14700 remains crucial for upsides to continue...

Easy Trip Planners Ltd. - IPO - Strong Financials - Reliance Securities

Bharat Forge - Initiating Coverage - Constant evolution - HDFC Securities

Mahindra Logistics - Large-ticket deal win - ICICI Securities

Company Update - Huhtamaki India - ICICI Direct

Gladiator Stocks: IndusInd Bank, VIP Industries - ICICI Direct

Warehousing demand expected to grow around 160% to reach 35 million sq. ft in 2021: JLL

Telecom - Spectrum auction: Prudent investment by Bharti Airtel - ICICI Securities

JB Chemicals & Pharmaceuticals - Analyst meet takeaways - ICICI Securities

IPO Review - MTAR Technologies Ltd - ICICI Direct

Auto Sector - Monthly Volume Round-up - Feb 21 - Decent YoY Growth Continues

Aditya Birla Fashion and Retail - Focus on scaling up new businesses - ICICI Securities

Automobiles (wholesale) - Wholesales push continues despite modest retail trends - ICICI Securities

Aditya Birla Capital - Thoughtful (inclusive) conglomerate business evolution commands premium - ICICI Securities

Jubilant Foodworks - Buying in-the-money options - ICICI Securities

Multi Commodity Exchange of India - Play on rising commodity prices? - ICICI Securities

Gladiator Stocks - Sudarshan Chemical - ICICI Direct

Monthly Commodities Outlook - March 2021 - ICICI Direct

ICICI Direct - Monthly Currency Outlook: Rupee to depreciate further towards 75.00 level...

ICICI Direct - Covid Recovery Pulse - E-way bill generation in February 2021 starts on strong note...

Company Update - Virtual JLR Investor Event - Tata Motors - ICICI Direct

Analyst Meet Update - Aditya Birla Fashion and Retail - ICICI Direct

MTAR Technologies Ltd. - IPO - Huge Opportunities from Clean Energy Bodes Well - Reliance Research

ICICI Direct Derivatives Weekly View (February 26): Failure to move above 14700 may extend declines towards 14300...

Bank: Sector Credit Trends - Slows, Yet again - HDFC Securities

Piramal Enterprises - Pharma day highlights - ICICI Securities

Polymer price tracker - PVC prices rise sharply again! - ICICI Securities

Greenply Industries - Growth returns, at an inflection point - ICICI Securities

Tata Motors - JLR future proofing itself with rapid electric transition - ICICI Securities

Dairy - Higher freight cost and increase in Global SMP prices - ICICI Securities

Analyst Meet Update - Nestlé India (Hold): Focus on product innovation, expanding rural reach - ICICI Direct

MTAR Technologies Ltd - A strong player in booming high precision engineering... - Geojit

Rollover Report for February - March 2021 : Angel Broking

Reaction from industry experts on Q3FY21 GDP numbers

M. Govinda Rao, Chief Economic Adviser, Brickwork ratings on Q3FY21 GDP numbers

Mr. Dhiraj Relli, MD & CEO, HDFC securities views on Q3FY21 GDP Growth Number

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research on Q3FY21 GDP

Rollover Analysis - Feb 21, 2021 - YES Securities

Consumer Durables - Demand-driven recovery continues - HDFC Securities

Cement - Demand surprises; earnings upgrade to continue - ICICI Securities

Gladiator Stocks - TeamLease Services - ICICI Direct

Gladiator Stocks - Metals to outshine post multi-year breakout... - ICICI Direct

Company Update - Sundaram Finance - ICICI Direct

Indian pharmaceutical industry to meet an ambition of US$130 billion by 2030 through innovation-led growth: EY-FICCI report

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

disclaimer copyright © 2005 - 2020