Is FMCG Sector worth Investing?
In 2011 the FMCG sector shares were the only ones that provided the investors positive average returns of 8 percent. In the same period the Hindustan Unilever Ltd. (HUL) was one of the major performers in the stock market. During November the stocks of the organization reached their peak and their showing in the second quarter was fairly good as well.
Meanwhile, the shares of two other prominent names in India’s FMCG sector – Colgate Palmolive and GSK Consumer Healthcare have performed pretty well too. In November the shares of both the organizations reached their highest point in 52 weeks.
In the last couple of years the shares of the fast moving consumer goods companies have provided investors with a certain sense of security during times of financial trouble. The Vice President of the Equities division at Motilal Oswal Securities, Rikesh Parikh, has stated that FMCG shares are regarded as good defensive options.
He has also stated that in the period between July 2010 and July 2011 the FMCG index delivered 23 percent returns compared to the auto index that provided 6%. As per economic experts, the FMCG shares like technology and energy stocks have low beta and provide greater yields in terms of dividends.
Leading FMCG Shares
Following are the leading FMCG shares of the BSE:
Company | CMP | Market Capitalization in crores | PE |
---|---|---|---|
Gillette India | 2511.45 | 8156.63 | 132.35 |
Britannia Inds. | 596 | 7099.51 | 42.82 |
P&G Hygiene | 2198 | 7104.52 | 42.16 |
Nimbus Foods | 1.58 | 7.11 | 35 |
GlaxoSmith C H L | 2760 | 11568.81 | 34.92 |
Marico | 171.55 | 10499.42 | 33.95 |
Hatsun AgoProd. | 78.95 | 836.83 | 33.35 |
Emami | 414.2 | 6097.39 | 25.11 |
Vikas Granaries | 37.85 | 65.32 | 14.77 |
Vadilal Enterp. | 114 | 9.44 | 14.76 |
Hind Inds. | 35.5 | 29.29 | 14.24 |
Shah Foods | 38 | 2.2 | 12.2 |
GKB Opthalmics | 34.65 | 13.7 | 11.22 |
Amar Remedies | 155 | 403.26 | 9.66 |
Chordia Food | 54.9 | 15.81 | 9.08 |
Bambino Agro Ind | 26.8 | 20.47 | 8.49 |
Vikas Wsp | 66.65 | 872.49 | 7.91 |
Umang Dairies | 38.85 | 84.81 | 7.54 |
Flex Foods | 27 | 33.62 | 6.73 |
Kothari Ferment. | 9.25 | 12.65 | 6.15 |
Usher Agro | 50.55 | 190.87 | 4.61 |
Temptation Foods | 4.2 | 16.55 | 0.24 |
Mount Everest | 102 | 345.78 | 0 |
Lotus Chocolate | 23.5 | 30.17 | 0 |
Modern Dairies | 14.15 | 32.6 | 0 |
Nestle India | 4718.05 | 45778.29 | 51.43 |
Madhur Inds | 14.5 | 5.99 | 39.59 |
Godrej Consumer | 492.7 | 16804.81 | 38.85 |
Dabur India | 105.5 | 18422.71 | 37.24 |
Colgate-Palm | 1143 | 15737.24 | 36.08 |
Hind. Unilever | 401.15 | 89447.69 | 35.74 |
Henkel India | 23.55 | 276.01 | 33.86 |
Zydus Wellness | 389.95 | 1534.86 | 24.37 |
DFM Foods | 220 | 227.35 | 20.14 |
Jyothy Lab. | 164.6 | 1332.82 | 16.95 |
Bajaj Corp. | 120 | 1775.16 | 14.89 |
Kwality Dairy | 37.65 | 766.06 | 11.06 |
T N Petro Prod | 16.1 | 146.22 | 10.76 |
Himalaya Intl. | 26 | 134.15 | 5.88 |
L T Foods | 39.2 | 102.91 | 5.1 |
KRBL | 18.35 | 447.3 | 4.35 |
REI Agro | 11.22 | 1121.82 | 4.31 |
Chamanlal Setia | 26.85 | 26.17 | 3.54 |
JHS Sven. Lab. | 40.95 | 74.68 | 0 |
SKM Egg Prod. | 6.44 | 17.38 | 0 |
RCL Foods | 33.55 | 16.06 | 0 |
Hipolin | 34.8 | 10.99 | 0 |
Lakshmi Energy | 18.45 | 118.18 | 0 |
Agro Dutch Inds. | 5.3 | 28.98 | 0 |
Tasty Bite Eat. | 122 | 32.38 | 0 |
The leading FMCG shares in the NSE can be enumerated as below (Please note that the statistics regarding market capitalization have not been repeated in case of companies which have been mentioned in the previous table):
Company | CMP | Market Capitalization in crores | PE |
---|---|---|---|
GlaxoSmith C H L | 2749.85 | NA | 34.77 |
Emami | 414.1 | NA | 25.47 |
Bajaj Corp | 121 | NA | 14.86 |
Kwality Dairy | 37.55 | NA | 11.01 |
L T Foods | 39.5 | NA | 5.12 |
Usher Agro | 50.55 | NA | 4.63 |
KRBL | 18.4 | NA | 4.34 |
Lakshmi Energy | 18.7 | NA | 0 |
KLRF Ltd | 28.95 | 14.21 | 0 |
Gillette India | 2500 | NA | 132.66 |
Nestle India | 4715 | NA | 51.37 |
Britannia Inds. | 591.25 | NA | 42.93 |
P&G Hygiene | 2189.65 | NA | 42.23 |
Godrej Consumer | 491.15 | NA | 38.93 |
Dabur India | 105.55 | NA | 37.32 |
Colgate-Palm | 1139.2 | NA | 36.16 |
Hind. Unilever | 400.75 | NA | 35.73 |
Marico | 170.85 | NA | 34.04 |
Zydus Wellness | 387.25 | NA | 24.4 |
Vadilal Inds. | 125.3 | 93.11 | 23.33 |
Heritage Foods | 146.1 | 169.49 | 19.95 |
Jyothy Lab. | 162.85 | NA | 16.99 |
Sita Shree Food | 5.55 | 12.52 | 10.77 |
T N Petro Prod. | 16.1 | NA | 10.73 |
Amar Remedies | 154.25 | NA | 9.67 |
REI Agro | 11.1 | NA | 4.25 |
Kohinoor Foods | 32.2 | 91.62 | 0 |
JHS Sven Lab. | 40.4 | NA | 0 |
SKM Egg Prod. | 6.5 | NA | 0 |
Agro Dutch Inds. | 5.1 | NA | 0.00* |
(*Please note that the above mentioned figures are subject to change)
One of the major reasons behind the good performance of the FMCG shares has been the strong consumer affinity, which has helped them to raise their product prices. This trend is set to continue in the days ahead and organizations with greater offerings are expected to benefit from it.
Is the FMCG sector worth investing?
In 2011 the FMCG funds provided investors with an average yield of 8-10.57 percent. Sectoral funds such as the FMCGs provide the investors with lot of assurance in times of financial problems as per the Vice President of Gurukshetra.com, Devangi Bhuta.
Morningstar India says that the FMCG funds have shown lesser fluctuation in the long term as opposed to diversified equity funds. In the last 5 years, the FMCG sector shares have shown lower standard difference of 22.14. In the same period the large cap funds have recorded similar figure of 29.78 and for the mid and small-cap funds the figure stands at 32.49.
At present the PE multiple of the FMCG indices in the BSE is 27 times of the forward earnings for a year, which is fairly expensive. The BSE Sensex is presently worth 13 times more than the forward earnings. This has taken the valuation of the FMCG sector to 108 percent premium over the greater market.
Naveen Trivedi, who works as an analyst with PINC Research, has stated that at the present moment the expensive nature of FMCG valuations and the stocks’ performance will play a major role in determining how well the stocks perform in the days to come.
Some analysts are of the opinion that these shares will have premium valuations in the immediate future. Kaustubh Pawaskar, a Sharekhan analyst, has stated that in spite of the expenses involved the sector will draw attention because of the uncertain financial conditions at present.
It is estimated that as soon as the Indian economy starts to grow these shares will fall behind the high growth industries. Experts feel that the investors need to be selective when it comes to investing in the FMCG shares – there are a couple of stocks that are expected to do better than the others such as the following:
- ITC
- GlaxoSmithKline
- Godrej Consumer Products
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