FMCG Stocks Outlook: Positive next wk; profit sales may cap gains
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B. Karthick
Sep 27, 2008, 12:16:53 AM9/27/08
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FMCG Stocks Outlook: Positive next wk; profit sales may cap gains
Saturday, Sep 27
Fast moving consumer good shares are expected to show a positive
bias, but broad trends will be dictated by the overall market
conditions.
There has been aggressive fund buying in select counters...it is a
pure defensive play. Some big guys have come in and they are trading
heavily...they are lapping up frontline stocks like HUL (Hindustan
Unilever), ITC and Colgate (Palmolive).
We expects the trend to continue for a few more days.
However, technically most FMCG stocks will show some
consolidation, and hence the rise may be capped.
One may also see some profit sales in the early part of the week,
unless (global) crude oil (price) shows some positive surprise.
Dabur, Marico and Godrej Consumer shares are expected to remain
weak next week.
This week, FMCG shares outperformed the broad market, with key
counters like ITC, Hindustan Unilever and Colgate showing significant
gains.
The FMCG Index gained 0.6% over the week to close at 2189.07
points, while Nifty and Sensex ended the week with a loss of 6.1% and
6.7%, respectively.
However, positive on the sector ahead of Jul-Sep earnings that
will be reported in October.
Results are expected to be good. HUL should easily post a 15-18%
growth in earnings.
Hindustan Unilever has hiked prices of all its products several
times in Jul-Sep, including detergents and soaps where raw material
costs have actually come down. This will boost margins.
ITC, on the other hand, is expected to report a 3-5% year-on-year
de-growth in cigarette business, but price hikes that came into effect
this quarter will boost overall margins.
PRICE HIKES
At a recent conference, Sudhanshu Vats, Hindustan Unilever's vice-
president - homecare, said the company has taken "some" price hikes on
select products in its homecare portfolio to offset the impact of cost
escalation.
Even though LAB (linear alkylbenzene) prices have declined
recently, they had touched a peak in July, and still remain high
despite the fall," he said.
Linear alkylbenzene is a key ingredient for making detergents, and
its prices have come down nearly 40% since July.
Company officials said rural demand, which was growing at about
12-14%, was outpacing urban demand at HUL.
In the current economic conditions, we might see the discretionary
spending by consumers affecting volume growth of the company.
While some raw material costs had come down, margins would remain
under pressure from high advertising spends.
Following are the closing prices yesterday of most liquid FMCG
shares on NSE, compared with a week ago:
Company Sep 26 Sep 19 Change Next
week
Resistance Support
Hindustan Unilever 252.50 245.20 2.9%
255 225
ITC 192.35 191.05 0.7%
200 180
Colgate-Palmolive 405.85 379.85 6.8%
450 350
Dabur India 89.95 88.90 0.1%
90 73
Marico 59.00 59.00
0.0% 67 50
BSE FMCG Index 2189.07 2175.24 0.6%
Nifty 3985.25 4245.25 (-)6.1%
Sensex 13102.18 14042.32 (-)6.7%
B.Karthick
Research Analyst.
Saturday, Sep 27
Fast moving consumer good shares are expected to show a positive
bias, but broad trends will be dictated by the overall market
conditions.
There has been aggressive fund buying in select counters...it is a
pure defensive play. Some big guys have come in and they are trading
heavily...they are lapping up frontline stocks like HUL (Hindustan
Unilever), ITC and Colgate (Palmolive).
We expects the trend to continue for a few more days.
However, technically most FMCG stocks will show some
consolidation, and hence the rise may be capped.
One may also see some profit sales in the early part of the week,
unless (global) crude oil (price) shows some positive surprise.
Dabur, Marico and Godrej Consumer shares are expected to remain
weak next week.
This week, FMCG shares outperformed the broad market, with key
counters like ITC, Hindustan Unilever and Colgate showing significant
gains.
The FMCG Index gained 0.6% over the week to close at 2189.07
points, while Nifty and Sensex ended the week with a loss of 6.1% and
6.7%, respectively.
However, positive on the sector ahead of Jul-Sep earnings that
will be reported in October.
Results are expected to be good. HUL should easily post a 15-18%
growth in earnings.
Hindustan Unilever has hiked prices of all its products several
times in Jul-Sep, including detergents and soaps where raw material
costs have actually come down. This will boost margins.
ITC, on the other hand, is expected to report a 3-5% year-on-year
de-growth in cigarette business, but price hikes that came into effect
this quarter will boost overall margins.
PRICE HIKES
At a recent conference, Sudhanshu Vats, Hindustan Unilever's vice-
president - homecare, said the company has taken "some" price hikes on
select products in its homecare portfolio to offset the impact of cost
escalation.
Even though LAB (linear alkylbenzene) prices have declined
recently, they had touched a peak in July, and still remain high
despite the fall," he said.
Linear alkylbenzene is a key ingredient for making detergents, and
its prices have come down nearly 40% since July.
Company officials said rural demand, which was growing at about
12-14%, was outpacing urban demand at HUL.
In the current economic conditions, we might see the discretionary
spending by consumers affecting volume growth of the company.
While some raw material costs had come down, margins would remain
under pressure from high advertising spends.
Following are the closing prices yesterday of most liquid FMCG
shares on NSE, compared with a week ago:
Company Sep 26 Sep 19 Change Next
week
Resistance Support
Hindustan Unilever 252.50 245.20 2.9%
255 225
ITC 192.35 191.05 0.7%
200 180
Colgate-Palmolive 405.85 379.85 6.8%
450 350
Dabur India 89.95 88.90 0.1%
90 73
Marico 59.00 59.00
0.0% 67 50
BSE FMCG Index 2189.07 2175.24 0.6%
Nifty 3985.25 4245.25 (-)6.1%
Sensex 13102.18 14042.32 (-)6.7%
B.Karthick
Research Analyst.
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