Consumer goods cos' net set to grow 22%

Fuelled by price hikes across categories, fast moving consumer goods (FMCG) companies are expected to see a surge in net profit growth for the quarter ended December 31, 2007.

Analysts expect net profit to grow 22 per cent, compared with 17.7 per cent in the corresponding quarter of the previous year.

Sales growth, however, is expected to remain flat at 14 per cent, the same as a year ago.

This quarter, ITC and Hindustan Unilever may clock sales growth of nearly 15 per cent and 20 per cent, respectively.

Anand Shah, a research analyst at Angel Broking said that despite the pressure of high value-added tax, the price hikes on cigarettes will push up ITC's net profit.

The non-tobacco business will take a while to contribute to profits as the business still requires distribution to be scaled up and new products to be launched.

For Hindustan Unilever, the early onset of winter would lead to higher growth in the personal care business with the consumption of wintercare skin creams.

The re-launch of the Lakme range would also enable the company to post sales growth of about 13 per cent, which would increase profitability by 16 per cent.

HUL would also benefit from the low base in the corresponding quarter of the previous year, when sales grew 6.3 per cent and net profit by 10.2 per cent.

A pack of four companies - Asian Paints, Dabur, Marico and GlaxoSmithKline Consumer - could register a sales growth of nearly 20 per cent and net profit growth of over 22 per cent.

A likely star-performer is Nestle, which could achieve sales growth of over 20 per cent and net profit of over 25 per cent. Analysts say that product launches and price hikes may propel Nestle to the best performer's slot with an operating profit margin increase (OPM) of nearly 50 basis points (bps).

Another company which could witness a sharp OPM rise is Colgate-Palmolive India. Its OPM is expected to increase by 260 bps due to price hikes and cost reduction. Revenue growth is expected to go up nearly 13 per cent and profit by over 25 per cent.

Tata Tea, which has been seeing a dip in net profit due to high interest costs, is expected to see a sharp reversal in its fortunes. Analysts said the company's net profit may grow 120 per cent mainly due to the money received from the stake sale in Glaceau to Coca-Cola.

Tata Tea is expected to register sales growth of 10 per cent, according to a preview report from Morgan Stanley.

The high growth in the infrastructure sector is expected to drive up Asian Paints' revenue, though margins will remain flat at nearly 13 per cent.

Dabur is expected to see high volume growth across segments such as household products, oral care, juices and international operations.

Soap-maker Godrej Consumer Products (GCPL) is expected to see a decline in margins by 140 bps due to high palm oil prices, a key raw material in the manufacture of soaps. However, it is expected to achieve double-digit growth in soap sales.

Marico, on the other hand, would benefit from the 5 to 12 per cent price hike in its flagship brand Parachute hair oil and edible oil brands such as Saffola.

For GSK Consumer, the growth momentum is likely to continue due to continued strong performance by Horlicks and Boost, says a report by broking firm Motilal Oswal Securities.