ET Intelligence Group: Packaged food makers Nestle India and Britannia have emerged as the fastest growing in the FMCG space during the lockdown as shuttered restaurants and lack of domestic help forced many Indian consumers to lean on ready-to-eat foods. Analysts expect the trend to sustain.
“Low-ticket packaged foods (including biscuits, noodles) will gain prominence in the short term as consumers are likely to avoid restaurant-made food due to Covid-19 related concerns,” said Vishal Gutka, analyst with Phillip Capital.
Shares of Nestle India have gained 33% since the beginning of the lockdown on March 24. The company posted a 10.7% year-on-year revenue growth in the March 2020 quarter, highest among peers while the operating profit rose by 5.4%. “In the near term, the stock offers better resilience in the topline growth versus peers as a result of the nature of its portfolio. It is likely to be the only stock in our universe which may generate a near double-digit net profit growth for the current fiscal,” said Krishnan Sambamoorthy, FMCG analyst with Motilal Oswal Financial Services.
Over the past few years, Nestle has widened its packaged foods portfolio beyond Maggi Noodles into pasta, upma and poha. In a recent report, brokerage Nomura estimated its revenue to grow by 5% and 16%, respectively, in the two years to FY22 given the possibility of higher demand for its products.
Britannia, the country’s largest biscuit company, was the only other FMCG player to post positive revenue growth of 1.6% in the March quarter and 4% growth in operating profit. Analysts expect the company to report 13% revenue growth for FY21. “Britannia is witnessing a strong acceleration in growth as per our channel checks. Its wide and affordable portfolio, leadership across categories, stronger innovation pace and better distribution capabilities make it best-placed in the current disruptive phase,” said Ashit Desai, analyst with Emkay Global Financial Services.
Prices of major inputs such as wheat, milk and sugar have either fallen or remained flat in the past two months, which should support the margins of these companies.
Shares of Nestle India and Britannia closed at Rs 17,200 and Rs 3,463 on Thursday, each down by 1.3% from the previous day’s close. They were traded at trailing price-earnings multiples of 82 and 59 in that order.
Agencies
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