What is your expectation from the FMCG pack?
For the FMCG pack, we are expecting a double digit revenue growth largely made by the improvement in the sales volume. The margins are expected to be lower due to the increase in commodity prices. So starting with
we are expecting around 11% growth in the revenues to Rs 12,741 crore. We are expecting domestic volume growth to be around 6-7%. Both home care and personal care are expected to do at around 10-11%.
Also the foods business with nutrition business scaling up we are expecting around 12-13% growth in the foods business.
In terms of the operating margins, we are expecting operating margins to be lower by 90 bps to 24.2% and we are expecting PAT to grow by around 5% to around Rs 2.167 crore.
In terms of Nestle, we are expecting revenues to grow by around 10% largely driven by a volume-led growth, volume growth is expected to be in the high single digit for the domestic business. We are expecting Maggi and the chocolate business to grow in double digits. We are expecting because of the recovery in the out of home consumption the beverages should see a sequential improvement in revenues. For
also we are expecting around 50 bps decline in the operating margins and we are expecting a single digit growth in PAT.
How are you looking at valuations? Is there a re-rating and what is the outlook from this point on?
The sector’s valuations are currently at a premium and we need to understand that FMCG was a relatively less impacted sector compared to the other sectors. It was considered as the safest bet and in that context we have seen most of the companies recovering. During the first wave, from Q2 we saw the recovery started but from the second wave also, things were much better from the supply and distribution point of view.
The sector recovery was much faster. Rural came back on track and in FY21 we have seen that most of the companies saw strong improvement in the rural growth and that is expected to continue in the quarters ahead and also with receding cases, urban recovery would be there especially in the out of home categories.
So growth would continue. We expect a double digit kind of revenue growth to sustain. Near term margins pressure will be there but from the longer term view, the scale up in the margins would continue for the companies, considering the premiumisation strategy, considering the supply efficiencies the companies are focussing on.
The earning growth visibility is there. Balance sheets are strong. So valuation will continue to remain firm. However, we have to be selective in this space and considering our stance of selective companies we like
Industries, Godrej Consumer, Marico and Tata Consumer Products in the largecap and among the midcaps, we like Indigo Paints and where the room for earning growth is much higher than their peers in the space.
