FMCG Stocks Outlook for the week (08 - 12.10.2012)

[rupeedesk]

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.

By RUPEE DESK

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