Emkay FMCG Sector

Update
Sector
Research FMCG – Aberration or Trend?
March 19, 2009

The best defensive bet i.e. the consumer staple sector has been steadily sliding
HUL BUY down over the last few weeks. The global fall in consumer staple stocks started in
February with their Indian counterparts following with a slight lag. In international
Price Target Price markets, P&G (-16.8%), Diageo (-19.2%), ITC (-16.8%) & Colgate (-14.6%) under
Rs233 Rs305 performed the US market while McBride (-8.3%) and Croda (-16.8%) under
performed the European markets. European markets reported 8-10% decline while
Price Performance S&P registered 8.4% decline over the same period. Indian consumer staple sector
(%) 1M 3M 6M 12M
mirrored the global trend with a lag of 15 days. Consumer staple majors like HUL
(-15.3%) and ITC (-10.6%) and APL (-11.8%) reported sharp decline in stock prices
Absolute (9) (6) (2) 1 after 16th February 2009. The absence of any adverse news flow for the sector
Rel. to Sensex (6) 4 44 66 raises several questions - Is this temporary aberration? Or is this an early
indicator of a shift in trend from defensives to more lucrative options?

APL BUY Despite this, we reiterate our positive stance on the consumer staple sector and
expect the sector to report robust earnings growth accompanied with earning
Price Target Price surprises in next 2 quarters. In absence of incremental actions or news flow, we
Rs753 Rs1,000 do not view obstacles to the earnings performance for next 2 quarters. However,
we believe that the pricing actions and volume indications will be key reference
Price Performance points for the sector. We will closely monitor the general price actions and
volume indications for any change in earnings momentum for the sector. But, it is
(%) 1M 3M 6M 12M very unlikely that sector will witness de-rating in next 2 quarters despite any
Absolute (6) (13) (37) (34) unexpected change in earnings momentum.
Rel. to Sensex (3) (3) (7) 10
Key Financials: Rs Mn
GCPL ACCUM Hindustan Unilever Ltd.
Div
Net EBITDA AEPS EV/ Yld RoE
Price Target Price
YE-Mar
Sales (Core) (%) APAT (Rs) EBITDA P/BV (%) (%) P/E
Rs112 Rs127
CY2006 124,110 15,954 12.9 18936 6.8 25.7 19.6 2.7 62.8 34.2
Price Performance CY2007 139,134 19,033 13.7 19189 8.0 21.7 33.6 4.5 84.1 29.2
CY2008E 165,186 22,181 13.4 20253 9.3 18.7 29.9 3.6 126.3 25.1
(%) 1M 3M 6M 12M CY2009E 186,912 28,573 15.3 25567 11.7 14.9 26.1 4.6 140.5 19.8

Absolute (12) (3) (5) (14) Asian Paints Ltd.

Rel. to Sensex (9) 8 41 42 Div
Net EBITDA AEPS EV/ Yld RoE
YE-Mar
Sales (Core) (%) APAT (Rs) EBITDA P/BV (%) (%) P/E
MARICO ACCUM FY2007 36,700 4,856 13.2 2868 29.9 14.5 9.4 3.0 40.3 25.2
FY2008 44,043 6,598 15.0 4327 45.1 10.4 7.4 1.2 49.2 16.7
Price Target Price FY2009E 53,700 6,530 12.2 4162 43.4 10.5 5.6 1.2 36.6 17.4
FY2010E 58,693 7,529 12.8 4786 49.9 9.1 4.4 1.3 32.5 15.1
Rs62 Rs60
Godrej Consumer Products Ltd.
Price Performance
Div
Net EBITDA AEPS EV/ Yld RoE
(%) 1M 3M 6M 12M YE-Mar
Sales (Core) (%) APAT (Rs) EBITDA P/BV (%) (%) P/E
Absolute 5 16 7 (2) FY2007 9,515 1,800 18.9 1392 6.2 14.8 20.8 3.3 114.0 18.2
Rel. to Sensex 9 29 59 62 FY2008 11,040 2,229 20.2 1592 7.0 12.0 14.7 3.6 92.7 15.9
Source: Bloomberg FY2009E 13,691 1,901 13.9 1594 6.2 14.0 4.5 3.2 25.1 18.1
FY2010E 15,191 2,229 14.7 1886 7.3 11.5 4.0 3.8 26.4 15.3

Pritesh Chheda, CFA Marico Ltd.

pritesh.chheda@emkayshare.com Div
Net EBITDA AEPS EV/ RoCE
Yld
+91 22 6612 1273
YE-Mar Sales (Core) (%) APAT (Rs) EBITDA P/BV (%) (%) P/E
Sachin Bobade FY2007 15569 1990 12.8% 1129 1.9 20.0 19.6 1.1 24.4 33.5
sachin.bobade@emkayshare.com FY2008 19067 2380 12.5% 1692 2.8 17.1 12.0 1.1 32.7 22.3
FY2009E 22558 2859 12.7% 1853 3.0 13.9 8.3 1.2 30.1 20.4
+91 22 6624 2492
FY2010E 25602 3307 12.9% 2184 3.6 11.8 6.1 1.4 30.6 17.3

Emkay Research 19 March 2009 1

 FMCG Sector Update

Croda International (Europe) declined 16.9% since Jan 30 2009

Diageo (Europe) declined 19.2% since Jan 30 2009

Emkay Research 19 March 2009 2

 FMCG Sector Update

GlaxoSmithKline (Europe) declined 13.2% since Jan 30 2009

Henkel (Europe) declined 15.5% since Jan 30 2009

Emkay Research 19 March 2009 3

 FMCG Sector Update

McBride (Europe) declined 8.3% since Jan 30 2009

Nestle (Europe) declined 8.2% since Jan 30 2009

Emkay Research 19 March 2009 4

 FMCG Sector Update

Reckitt Benckiser (Europe) declined 2.6% since Jan 30 2009

Church & Dwight (US) declined 7.6% since Jan 30 2009

Emkay Research 19 March 2009 5

 FMCG Sector Update

Colgate (US) declined 14.6% since Jan 30 2009

ITC (US) declined 16.8% since Jan 30 2009

Emkay Research 19 March 2009 6

 FMCG Sector Update

P&G (US) declined 16.8% since Jan 30 2009

Phillip Morris (US) declined 6.4% since Jan 30 2009

Emkay Research 19 March 2009 7

 FMCG Sector Update

Asian Paints (India) declined 8.2% since Jan 30 2009

Dabur (India) surged 4.2% since Jan 30 2009

Emkay Research 19 March 2009 8

 FMCG Sector Update

GCPL (India) declined 8.4% since Jan 30 2009

GSK C H L (India) soared 0.5% since Jan 30 2009

Emkay Research 19 March 2009 9

 FMCG Sector Update

HUL (India) declined 12.1% since Jan 30 2009

ITC (India) declined 8.0% since Jan 30 2009

Emkay Research 19 March 2009 10

 FMCG Sector Update

Marico (India) surged 5.0% since Jan 30 2009

Nestle (India) soared 2.3% since Jan 30 2009

Emkay Research 19 March 2009 11

 FMCG Sector Update

United Spirits (India) soared 7.1% since Jan 30 2009

Source: Bloomberg

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Emkay Research 19 March 2009 12