FMCG Stocks Outlook for the week: 07 - 11.01.2013

www.rupeedesk.in

Stocks of major fast-moving consumer goods companies are expected to underperform the market next week because of stretched valuations, and as investors are now shifting their focus to sectors such as banking, information technology, real estate, and metals. There is room for further downward correction in stocks of FMCG companies as their valuations are rather high currently. Benchmark stock indices are likely to gain in the next few sessions because of recent regulatory and economic reforms and positive news flows on the global front.

The BSE's FMCG index is expected to continue underperforming benchmark indices next week. However, the sector's fundamentals are strong, with demand for FMCG products remaining firm. Also, hike in product prices is expected to improve the operating margins of FMCG companies.

FMCG Stocks Outlook for the week: 31.12.2012 - 04.01.2013

www.rupeedesk.in

Stocks of major fast-moving consumer goods companies may move sideways and largely remain flat in the week ahead, as investors will stay away from these counters due to high valuations. Over the past few weeks, the BSE-FMCG index has underperformed the broader market, as investor interest in other sectors such as banking, real estate, and metals has increased. Investors are overlooking FMCG stocks for fresh buys and investors who bought these at lower levels earlier are staying put in their investments.

ITC stocks are trading at 24 times the company's estimated 2013-14 (Apr-Mar) earnings, Hindustan Unilever's stocks are trading at around 33 times the company's estimated 2013-14 earnings and Colgate Palmolive India's stocks are trading at 27 times the company's estimated 2013-14 earnings. Stubbornly-high valuations of FMCG stocks are expected to keep investors away, as the action may continue to shift to other sectors. The fundamentals of FMCG companies remain strong, however, and good demand may allow them to hike prices. FMCG companies to report strong sales volume and value growth in Oct-Dec despite the slowdown in overall economy.

FMCG Stocks Outlook for the week: 24-28.12.2012

www.rupeedesk.in

Stocks of fast moving consumer goods companies have lost value over the past few sessions, and this trend is expected to continue in the week ahead as investors continue to book profits.  HUL (Hindustan Unilever) and ITC shares are trading at multiples of their FY12 earnings and while demand looks strong, there is room for (downward) correction.

Fundamentals of FMCG companies remain strong, with good demand outlook leading to prospects of strong sales volume growth. Easing raw material prices, along with sustained price increases implemented by companies, has led to expectations of healthy margin growth for the companies. Stocks of the companies, however, do not reflect the situation on the ground as after a period of sustained appreciation in their value, there have been sessions of profit booking, which are expected to continue even at the current price level.

FMCG Stocks Outlook for the week (17-21.12.2012)

www.rupeedesk.in

After paring value in the last five sessions, stocks of fast-moving consumer goods companies are likely to fall next week as well, as investors are seen booking profits. The BSE-FMCG index is also seen under-performing broader markets. Over the past week, stocks of sector heavyweights such as ITC and Hindustan Unilever shed value. ITC stocks fell after being down-weighted as part of a regular FTSE quarterly review.
   
Hindustan Unilever stocks fell on fears that the company may have to pay increased royalty to its parent company, following in the footsteps of PT Unilever Indonesia. However, it has dented sentiments on the stock. Any adverse development on the royalty payment issue could result in an additional pressure on the margin. We believe that in the current challenging environment, with the volume growth moderating, the company may be unable to resort to price hikes to offset the impact of royalty payments.

FMCG Stocks Outlook for the week (10 - 14.12.2012)

www.rupeedesk.in

Stocks of fast-moving consumer goods companies are likely to move in a narrow range with a negative bias next week due to likely profit booking by investors. Value of FMCG stocks are high enough to permit some profit booking in the week ahead. Consequently, we see the BSE-FMCG index under-performing the broader market in the week ahead. Over the past week, broader indices rose due to passage of foreign direct investment in multi-brand retail in Parliament.

Broader indices are expected to gain momentum in the next few sessions as the government is likely to take up further reforms in the on-going Winter Session of Parliament.However, the performance of FMCG stocks is seen subdued due to their already high values. Stock of FMCG heavyweight ITC is currently trading at around 37.8 times the company's 2011-12 (Apr-Mar) earnings per share, while that of Hindustan Unilever is trading at around 46 times the company's 2011-12 earnings. Sale of products such as moisturising creams, balms, lozenges, and formulations such as chyawanprash rise during winter.

FMCG Stocks Outlook for the week(03-07.12.2012)

www.rupeedesk.in

Stocks of fast-moving consumer goods companies are likely to stay at current levels in the coming sessions due to their already high valuations. Though domestic shares are seen rallying next week, gains in fast-moving consumer goods' shares will be capped due to their bloated value. Local equities gained last week tracking positive global cues and as India's gross domestic product grew on expected lines at 5.3% in Jul-Sep.

Shares of sector heavyweight ITC is currently trading at 37.8 times the company's 2011-12 (Apr-Mar) earnings, while those of Hindustan Unilever are trading at 46 times the company's 2011-12 earnings. Among mid-cap fast-moving consumer goods' stocks, Marico and United Spirits continue to be a top picks. Shares of the two companies are trading at 42.2 times and 104.5 times their respective 2011-12 earnings.

Over the past week, the BSE's FMCG index underperformed broader indices. This is expected to continue in the week ahead, as the indices are expected to see recovery that is more broad-based.

FMCG Stocks Outlook for the week (26-30.11.2012)

www.rupeedesk.in

Stocks of fast-moving consumer goods companies are likely to remain firm in the week ahead with a positive bias. Stocks of FMCG heavyweights ITC and Hindustan Unilever due to sustained sales volume growth even in the face of difficult macroeconomic conditions. Despite price hikes, ITC's cigarette volumes have remained resilient, underscoring the strength of the franchise. Additionally, the company's FMCG business's potential turn into profitability is a tailwind.

However, some market watchers reckon that the upside in FMCG shares is seen capped as they are already at elevated levels. FMCG shares have
consistently outperformed the broader market over the past months, as investors have sought safety from macroeconomic headwinds affecting shares of companies in other sectors.

FMCG Stocks Outlook for the week (19-23.11.2012)

www.rupeedesk.in

Stocks of fast-moving consumer goods companies are likely to remain range bound with a negative bias next week, due to a mix of profit booking and weakness in market. Over the past few months, FMCG stocks have advanced smartly, even outperforming the market. Investors could now look at booking profits in these stocks. Yesterday, the indices shed 1% each as investors got jittery over how the US could avoid a fiscal cliff and sold heavily in the last hour of trade.

The Bank Nifty, BSE Auto and BSE Realty lost 1.6-4.0%. The BSE FMCG index too was down 1.36%. Investors will keep a close watch on US President Barack Obama's meeting with US Congress leaders to discuss measures to lower its debt and avoid a fiscal cliff. However, the correction in FMCG shares is likely to be limited still have buy rating on these stocks because of strong fundamentals. Demand side factors for FMCG companies remain strong in India and these companies continue to invest in this market to boost sales.

FMCG Stocks Outlook for the week (12-16.11.2012)

www.rupeedesk.in

Stocks of fast-moving consumer goods companies are likely to recover in the coming sessions as money will flow into defensive sectors amid weakness in the broader market. While Jul-Sep earnings from most companies have been weak, those from FMCG companies have been broadly in line with market estimates, with some such as ITC even exceeding expectations.
   
The strong fundamentals of the FMCG sector are expected to attract investors looking for strong performers in an otherwise subdued market. Investors may buy stocks of major FMCG companies as they are confident of growth in sales volume and operating margin in the near to medium term. Confidence on sales volume growth of FMCG companies stems from strong underlying demand for products, so interest in FMCG shares is bound to continue.

FMCG Stocks Outlook for the week (05-09.11.2012)

www.rupeedesk.in

Stocks of fast-moving consumer goods companies are seen declining marginally next week as some key aspects in companies' Jul-Sep earnings have been below market expectations. This week, stocks of Hindustan Unilever have lost 3.5% as the company's sales volume growth in Jul-Sep stood at 7% as against expectations of 9-11%. Hindustan Unilever stocks are seen remaining subdued next week as investors is doubtful of the company's ability to maintain sales volume growth in the near term.
   
Yesterday, Marico reported its Jul-Sep consolidated net profit grew 9.7% on year. The company's shares ended down over 4% today on the results. Marico is also seen shedding value next week. This week, the BSE FMCG index has lost 0.7% in value even as broader indices have gained around 0.7%.

FMCG Stocks Outlook for the week (29.10.2012 - 02.11.2012)

www.rupeedesk.in

Stocks of fast-moving consumer goods companies are seen in a narrow range next week as investors may hold on to their positions in this defensive sector amid weakness in the market. However, investors are unlikely to take new positions in these stocks as valuations are stretched currently. Underlying sentiment on these stocks remains positives as FMCG companies' Jul-Sep earnings have been mostly in line with estimates so far.

Sector heavyweight Hindustan Unilever yesterday reported Jul-Sep net profit of 8.07 bln rupees, up 17.1% from a year ago. Net sales grew 11.6% to 61.55 bln rupees. The company's bottomline came better than expected but topline growth disappointed. Hindustan Unilever's operating margin increased 100 basis points to 15.48% in Jul-Sep as the company hiked product prices. However, lower-than-expected growth of 7% in the company's sales volumes will weigh on investor sentiment in the next couple of sessions. Later next week, the share may recover because the company's fundamentals remain strong.

Dabur India's quarterly earnings also came in line with estimates today. The company's Jul-Sep consolidated net profit rose 16.4% from a year ago to 2.02 bln rupees, and net sales increased 20.6% to 15.23 bln rupees. Sentiment on ITC remains bullish after the company's earnings topped estimates last week. Profit booking pulled the share down this week.

FMCG Stocks Outlook for the week(22-26.10.2012)

Stocks of fast moving consumer goods companies are seen outperforming the broader market this week on expectations of good earnings in the quarter ended Sep 30. Strong demand-side fundamentals and price hikes are expected to aid sales volume and margin growth for FMCG companies in Jul-Sep. In the absence of any other major triggers, investors will eye the quarterly results of companies for stock-specific cues.

While Dabur India will detail its quarterly results on Oct 26, Colgate Palmolive India and Marico will declare their earnings on Oct 29 and Nov 2, respectively.
On Friday, sector-heavyweight ITC Ltd, India's largest cigarette maker, declared higher-than-expected Jul-Sep earnings. The company registered a 21.3% on year growth in net profit at 18.36 bln rupees in Jul-Sep.

ITC's net sales for the period rose 19.6% on year to 71.46 bln rupees. Shares of ITC extended intra-day gains after the release of the results, rising more than 2% from the previous close to a lifetime high of 299 rupees. The stock ended 2% higher at 297.50 rupees on the National Stock Exchange on Friday.

Last week, the BSE FMCG index gained 2.6% in value, while broader indices remained flat. The BSE FMCG index is seen continuing its uptrend this week.

www.rupeedesk.in

FMCG Stocks Outlook for the week (15-19.10.2012)

Stocks of fast-moving consumer goods companies are seen rising in the week ahead as investors will continue to bet on safer sectors. Over the past week, while the broader indices lost nearly 1.4% in value, the BSE FMCG index gained 2% on increased investments. Investors will eye the Jul-Sep earnings of companies for stock-specific cues. ITC will declare its Jul-Sep earnings on Oct 19 and Dabur India will stock its quarterly results on Oct 26. Colgate Palmolive India and Marico will declare their earnings on Oct 29 and Nov 2, respectively. In the absence of any stock or industry-specific trigger in the near term, quarterly earnings will direct investors interested in the sector. Strong demand-side fundamentals coupled with price hikes are expected to aid sales volume and margin growth for FMCG companies in Jul-Sep. Buying or Accumulate rating for Stocks of FMCG companies due to the buoyant demand and price scenario, even though these companies' stocks are trading at multiple times their 2011-12 earnings per share.


www.rupeedesk.in

FMCG Stocks Outlook for the week (08 - 12.10.2012)

Stocks of fast-moving consumer goods companies are seen rangebound in the coming five sessions with investors remaining invested. Though domestic indices have risen over 8% since mid-September following several policy reforms to boost capital inflows, investors are unlikely to exit the defensive FMCG sector owing to the strong fundamentals of the business. However, the rise in FMCG stocks will be capped due to lack of fresh investments as these scrips are already trading multiple times their earnings per share for 2011-12 (Apr-Mar). In the absence of major stock- or industry-specific triggers, investors will look to Jul-Sep earnings of companies in the sector for direction. FMCG companies are expected to report strong earnings for Jul-Sep. We expect 16% revenue growth from companies in the sector, led by growth in sales volume. It also sees operating margins of FMCG companies under its coverage increasing by 40 basis points on a year-on-year basis. FMCG companies are likely to maintain their volume growth and operating margins in Jul-Sep as revival in monsoon rainfall would have ensured stable raw material prices. We continue to recommend buying stocks of FMCG companies given the steady demand-side pull and relatively favourable operating environment.

www.rupeedesk.in

FMCG Stocks Outlook for the week: 01.10.2012-05.10.2012)

Stocks of fast-moving consumer goods companies are seen down next week, as continued bullishness in overall market sentiment will reduce investor bets in defensive sectors. The domestic indices have risen over 8% so far in September. Overall investor risk sentiment has improved after the government introduced several reform initiatives. Investors have been diverting from FMCG companies to sectors such as retail, aviation, and infrastructure, where values are relatively attractive.

Stock movement in FMCG counters will reflect the overall market trend due to the absence of any major sector-specific or stock-specific trigger. FMCG counters are likely to move in the opposite direction of local indices. FMCG companies are likely to maintain their volume growth and operating margins in Jul-Sep as revival in monsoon rainfall will ensure stable raw material prices.

www.rupeedesk.in

FMCG Stocks Outlook for the week (24-28.09.2012)

Stocks of fast-moving consumer goods companies, considered defensive stocks, are expected to continue falling next week as broader market is seen extending this week's rally following a slew of economic reforms introduced by the government. Last week, the government allowed up to 51% foreign direct investment in multi-brand retail, and relaxed local sourcing norms for above 51% FDI in single-brand retail. It also allowed foreign airlines to buy up to 49% equity in domestic carriers. The government also increased the FDI limit in broadcast services to 74%.
Leading FMCG shares such as Hindustan Unilever Ltd and ITC Ltd have been trading at multiple times their earnings per share for quite some time, so a correction was expected. The correction in FMCG shares value is expected to continue in the near future, despite the strong demand fundamentals supporting growth of companies in the sector. Over the past week, the BSE-FMCG index lost 2.1% in value, even as the broader indices gained nearly 2%.

www.rupeedesk.in

FMCG Stocks Outlook for the week: 17.09.2012 - 21.09.2012

Stocks of fast-moving consumer goods companies are expected to fall in value in the week ahead as investors shift their focus to shares of companies in other sectors such as retail, airline, and broadcasting. Late Friday, the government allowed 51% foreign direct investment in multi-brand retail, while relaxing local sourcing norms for attracting FDI in single-brand retail. It also relaxed norms for foreign airlines to buy up to 49% equity in domestic carriers. The government also increased the FDI limit in broadcast services to 74% across the board.

Investors are therefore expected to be drawn to stocks in these sectors, which are grossly undervalued, in sharp contrast to FMCG stocks that are trading at multiple times their earnings per share in 2011-12 (Apr-Mar). On Thursday, the government announced a hike in diesel prices, which was followed by the announcement of a third quantitative easing by the US Federal Reserve. This spurred Indian share indices to end higher by over 2.5% Friday.

Over the past week, the BSE FMCG Index has gained 0.8%, in contrast to the 4% gain clocked by the Nifty and Sensex. However, the fall in shares of sector majors such as ITC Ltd and Hindustan Unilever Ltd is expected to capped.

www.rupeedesk.in

FMCG Stocks Outlook: 10-14.09.2012

Stocks of fast-moving consumer goods companies are expected to under-perform the market next week as investors are likely to shift their focus from defensive sectors to other more lucrative ones due to improvement in risk appetite.

Risk appetite improved globally because the European Central Bank, post its policy meeting Thursday, announced a programme to buy the short-term bonds of debt-ridden Eurozone nations such as Italy and Spain. Friday, domestic indices ended 2% higher in reaction to the ECB move.

Dabur India is seeing strong growth in sales volumes, and Marico's margins are seen rising as raw material costs have declined substantially. In the past few months, foreign institutional investors have been buying shares of big FMCG companies such as ITC while domestic investors have been active in stocks of mid-cap companies such as Marico.

There have been expectations of profit booking in shares of FMCG companies as they have been trading at high valuations for some time. This week, ITC shares came under profit booking.

www.rupeedesk.in

FMCG Stocks Outlook for the week (03.09.2012-07.09.2012).

Stocks of fast moving consumer goods companies are seen moving in the inverse direction of the broader indices in the week ahead. If the broader indices gain in value in the week ahead, there would be profit booking in FMCG stocks and so they will lose value, as investors move their money to other sectors.

However, if broader indices continue to remain weak, FMCG stocks will gain further as investors will flock to the safety of this sector. Over the past few months, stocks of big FMCG companies such as ITC Ltd have seen sustained buying by foreign institutional investors, while domestic institutional investors have bought stocks of mid-cap FMCG companies such as Marico Ltd.

Over the past week, the BSE's FMCG index gained 1.8%, even as broader indices--The BSE's Sensex and the National Stock Exchange's Nifty--lost around 2.4% each. Marico stocks gained 2.5% this week as investors bought into the stock as a fall in key raw material copra's prices raised hopes of better profit margin in the ongoing quarter. Stocks of Colgate Palmolive India Ltd and ITC also saw sustained buying through this week.
(www.rupeedesk.in)

FMCG Stocks Outlook for the week (27-31.08.2012)

Stocks of major fast-moving consumer goods companies are expected to continue to rise, outperforming the market in the week ahead. This week, all major FMCG stocks gained with Hindustan Unilever rising 2.9%, Dabur India 3.2%, and ITC 1.2%. Sustained buying, mainly from domestic institutional investors, lifted the stocks. The BSE FMCG index gained 1.8% as compared to the 0.5% rise witnessed by broader indices.

Stocks of Hindustan Unilever are trading at nearly 40 times price to equity, while those of Marico are trading around 34 times price to equity. Market watchers see this trend continuing given the strong earnings posted by FMCG companies. The India consumption story is strong, which is leading to sustained buying, as FMCG faces the consumer directly and fulfils basic needs. Major FMCG companies are also expected to continue showing sustained, high single-digit and double-digit sales volume growth in the near term. It is these performance expectations that are leading to buying of these stocks.


www.rupeedesk.in