Consumer Goods Sector - FY'18 Earnings Preview

Mixed bag of performances for FMCGs                                                                

In line with the year-long trend observed in the sector, we expect revenue growth for consumer goods companies in Q4’18 to remain majorly driven by volume performance. Specifically, we forecast stronger topline figures in the seasonally stronger fourth quarter amid higher consumption levels in the festive period, and also mildly buoyed by stronger commercial activity during the electioneering season.                                                                  

With this, we expect revenue in Q4’18 to rise 10% q/q across our coverage companies, with sales from the quarter contributing c.27% to total revenue for the year. In terms of FY’18 numbers however, revenue growth across our coverage is projected to moderate 4% y/y on average – a reflection of the varied performance observed across the major sub-sectors in the year.   

Looking at operating margin drivers in the quarter, we highlight the benign movement in inflation figures through Q4’18 amid stability in major variables such as exchange rate and fuel prices. We however expect higher interest costs q/q across our coverage noting the higher interest environment in the quarter. Nonetheless, following the sizable deleveraging of balance sheets across most companies, we forecast sizable y/y reduction in the net interest line.                           

Overall, majorly reflecting the trend across topline, we forecast mixed bottom line performances across our coverage companies with an average 13% y/y moderation in PAT for FY’18.