We expect our consumer coverage universe to see stable revenue growth, largely driven by volume. Though raw material prices are rising, we expect price hikes to lead to steady margins. Also, given higher taxes, we expect PAT growth to be 16% yoy for the sector.
n Steady revenue growth. Revenue growth for our consumer coverage universe is likely to be 17%, mainly led by volume growth. Impact of price hikes would be higher in 4QFY11 than in earlier quarters; also, full impact of the hikes in 3Q will be seen in 4Q.
n EBITDA margin stable. Despite higher raw material prices, overall sector margin would remain stable. We expect some companies' EBITDA margins to improve on a low base. Also, price hikes in the past two quarters will help in margin expansion.
n Rising competition. With aggressive ad spend by HUL to regain market share, P&G introducing products at lower prices and domestic players (ITC) aggressively launching products, we expect sector revenues to be squeezed. Higher ad spend and promotions would pressurize margins.
n Stock calls. We maintain Buy on ITC, Nestlé India, Asian Paints, Colgate, Godrej Consumer Products (GCPL), Marico, GlaxoSmithKline Consumer Healthcare (GSK-CH) and Emami; Hold on Dabur; and Sell on HUL, and Britannia. For mid caps, we have a Buy on Agro Tech, Zydus Wellness and VST Industries; and Hold on Bajaj Corp and Jyothy Labs
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.
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