New Delhi: The consumer goods sector will again register an impressive growth for the quarter ended December, indicates a Mint survey of five brokerages.
The global meltdown and its impact on the Indian economy notwithstanding, the fast-moving consumer goods sector recorded double-digit growth in its revenues and profits in the preceding three quarters. The brokerages—India Infoline Ltd, DSP Merrill Lynch Ltd, Motilal Oswal Securities Ltd, Angel Broking Ltd and IDFC-SSKI Securities Ltd—say the trend would have continued in the just concluded December quarter as well.
Consumer product companies, such as Hindustan Unilever Ltd (HUL), ITC Ltd, Britannia Industries Ltd, Colgate- Palmolive (India) Ltd, Nestle India Ltd, Dabur India Ltd, Marico Industries Ltd and Godrej Consumer Products Ltd (GCPL), are expected to post an average growth of 19% in sales and 10.5% in profits, the data collated from the brokerages indicate.
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According to the brokerages, market leader HUL’s sales are expected to have grown between 16% and 23%, whereas its profits are likely to lag behind, growing by between 9% and 15%. A report by Motilal Oswal says HUL is likely to post a 23% jump in revenues at Rs4,542 crore, and 15% increase in its profit after tax at Rs639 crore, for the quarter ended December, as against the same period last year.
But Angel Broking sees a 16% growth in sales at Rs4,269 crore and 9% rise in profit at Rs603 crore, and this growth, says the firm, will mainly be because of price increases the company executed during the quarter.
Motilal Oswal says it expects the volume (or the product offtake) growth to decline 5.5% in the December quarter over the same quarter last year.
ITC is expected to register 16-23% increase in net sales and 5-14% growth in net profit. India Infoline predicts a 16% growth in sales at Rs4,109 crore and 5% jump in profit at Rs875 crore. This is the lowest growth predicted among the five brokerages.
Britannia Industries, which is tracked only by India Infoline and Motilal Oswal among the five firms polled, is likely to see limited margin contraction as the full benefit of the 5-12% price increase executed by the company in the previous quarters would get accounted.
According to the estimates by India Infoline, Britannia is expected to register a 23% growth in sales at Rs810 crore and a 7% increase in profit after tax at Rs52 crore. Motilal Oswal expects sales to grow 22% to touch Rs800 crore and profits to expand 10% to Rs54 crore.
In the case of Nestle India, Motilal Oswal predicts the maximum 21% growth in sales at Rs1,080 crore, while DSP Merrill Lynch estimates maximum growth of 26.5 % in net profit at Rs118 crore. “We expect Nestle to be yet again the fastest growing company this quarter,” the DSP Merrill Lynch report said. “It (Nestle) continues to benefit from strong sales growth and good pricing power is enabling the pass-through of rising input costs.”
The brokerages estimate Colgate-Palmolive sales and profits to grow 14-16% and 12-17% in the stipulated quarter. While Motilal Oswal predicts the maximum increase in sales at Rs425 crore, DSP Merrill Lynch estimates sales to grow to Rs419 crore. “We expect a toothpaste volume growth of 10% and largely flat margins versus declining trend earlier,” says DSP Merrill.
Home-grown consumer products company Dabur India’s margins are likely to decline due to high raw material prices, losses in the retail business and higher growth in low-margin overseas subsidiaries, according to the five brokerages. The company is expected to post 15-18.5% growth in net sales and 9-13% growth in net profit, according to estimates. According to IDFC-SSKI, which has predicted the maximum increase of 18.5% in net sales at Rs770 crore and 13% growth in net profit at Rs107 crore, Dabur is expected to be driven by “high growth in hair care category”.
Marico’s domestic volume growth is likely to decline on a quarter-on-quarter basis, but international businesses in countries such as Bangladesh and Egypt are expected to record growth. The company is expected to post a robust 25% growth in sales at Rs635 crore, and 12.% increase in profit after tax at Rs48 crore, according to Motilal Oswal’s estimates.
Even in the case of GCPL, benefits of lower input costs will only partially get reflected in this quarter. India Infoline estimates GCPL’s sales to grow 19% to Rs325 crore while IDFC-SSKI expects profits to grow 6% to Rs45.7 crore.
Graphics by Ahmed Raza Khan / Mint