Godrej Consumer Products: Motilal Oswal
FY19 will be the best in terms of new launches. Rural growth continues to outpace urban. FY20 is expected to be a year of real recovery in the household insecticides (HI) segment after gro-undwork in FY19. GCPL’s earnings growth has been more consistent than its FMCG peers; however, with the pace of earnings growth coming off significantly and given its exposure to various geographies, attendant currency risks and relatively low RoE (early-20s), we believe the stock does not warrant a higher multiple. Maintain Neutral with a revised target price Rs1,155.
Hindustan Unilever: Prabhudas Lilladher
Hindustan Unilever reported a robust 11 per cent volume growth and 240 bps margin expansion as benefits of cost efficiency programmes and improved product mix have boosted profitability. Medium-term outlook looks encouraging given gradual pick-up in rural demand, sustained benefits from GST, normalisation of trade channels, low base for first quarter and second quarter of 2019 and success of new launches in naturals segment. Although HUL expects increase on competitive activity and higher input costs, sustained benefits of premiumisation in home care, success in naturals with Lever Ayush, Citra, Indulekha and strong growth in emerging categories (premium laundry, green tea, etc) will enable steady margin expansion. We remain positive on the long-term structural story; We retain accumulate with a target price of Rs1555.
ITC: HDFC Securities
For ITC, the worst is now behind. FMCG revenues grew by an impressive 10 per cent, driven by branded packaged foods and personal care products. Hotel maintained mid-single digit growth while Ebit growth of 13 per cent was healthy. Agri and Paper performance was weak. ITC’s cigarette business has registered around 10/9 per cent revenue CAGR in the last 10/5 years, despite punitive taxes. Despite the steep rise in taxes, ITC has improved cigarette performance consistently. Sequentially volume decline is abating and we expect positive volume growth in FY19. Non-cigarette businesses (especially FMCG), are value accretive, with improving franchise. We expect around 14 per cent revenue CAGR here over FY18-20E. We reiterate Buy with our target price of Rs 358.
Nestle India: Emkay Global Financial Services
Nestle reported a robust quarter with Ebitda and net profit growth of 35 per cent and 40 per cent, respectively, which was ahead of our expectations by 7 per cent. Compar-able sales grew by 13 per cent to Rs27.5 billion, in line with expectations. Operating margin witnessed strong improvement of 440bps, led by lower input costs and cost savings. Sales growth was driven by broad-based growth across categories and is indicative of near double-digit volume growth. We expect the growth momentum to sustain on the back of Nestle’s faster product and channel expansion with entry into new categories. We maintain accumulate and raise the target price to Rs 10,100.