FMCG - September 2012 quarter earnings preview - BRICS Research

Expect 16% revenue growth in Q2: We expect the growth of FMCG companies in our coverage universe to be driven by volumes and price in Q2. BRICS consumer universe would record 16% yoy growth to Rs.138.8bn in Q2. Marico and GCPL will benefit from acquisitions, while volumes will drive revenue growth for most companies. Recent price hike (9-10%) will accelerate APL's performance.

Gross margins expected to improve: Some softening in prices of inputs is likely to result in an expansion in the GM. We estimate 140bps yoy expansion in the GM for BRICS consumer universe. Marico is likely to record the maximum 500 bps expansion, while Colgate to record the maximum contraction of 50bps.

A&P spending expected to rise: In Q2, A&P spend is expected to increase by 140 bps yoy, led by 450, 250, 160 and 120 bps increase in the A&P spends of Dabur, Marico, GCPL and Marico respectively. The expansion in the GM and focus on maintaining volume growth will aid increase in A&P spend.

Operating margins to expand 40bps yoy: Expansion in GM will be partially offset by the increase in A&P spends in Q2. Marico and Colgate are expected to record the maximum expansion of 190 and 170 bps yoy in the operating margin, while Dabur is likely to witness a contraction of 190bps yoy.

Earning to grow 19% yoy: Marico and GCPL are expected to record the highest growth at 38% yoy and 23% yoy in earnings, driven by a higher operating growth. APL, Colgate and HUL are likely to record a yoy growth of 22%, 21% and 18% respectively, Dabur is expected to record the lowest earnings growth of 11%.

Source : Equity Bulls

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