fmcg final

Security Analysis & Portfolio Managment

BY Richa Priya , B-16

Reshma,B-39

RoadmapIndustry OverviewCompany AnalysisHULAsian PaintsBritanniaITCDaburMaricoAnalysis & construction of Portfolio

Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG). FMCG products are those that get replaced within a year

products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods.

FMCG may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks, tissue paper, and chocolate bars.

White goods in FMCG refer to household electronic items such as Refrigerators, T.Vs, Music Systems, etc.

Fourth Largest sector in the economy with total market size of $18.1bn and expects to rise to $33.4bn by 2015

FMCGSMEs

MULTI

RET

AIL

JUDGE LEGISLATOR

Presence of many MNCs and intense competition between organized and unorganized segment.

Low operational cost, availability of Raw materials, cheap labor gives India a competitive edge.

Penetration of markets is yet to reach maturity level, as rural markets are still untapped.

Growth is likely to come from matured product categories as more than 200mn people would shift to processed foods by 2010

Automatic investment approval for FDI upto 100%

Economy growing by more than 6% which would increase the buying power of the consumers.

Recent survey showing 47% of India’s 1+billion people are under age 20, among which 160mn are teenagers which has 14000crs of discretionary income and their families spend an additional 18500crs on them every year.

By 2015 Indians under age 20 are estimated to make up 55% of the population and would have proportionately higher spending power.

The FMCG sector in India is expected to grow at a compounded annual growth rate (CAGR) of 9%

Market Size

FMCG is relatively less capital-intensive, but demands immense skills and expenditure on branding and distribution.

Most companies in the sector create value through product differentiation, package innovation, differential pricing and highlighting the functional aspect of foods.

Inflation restricts the industry's growth, many companies in the sector thrive under inflationary pressures.

Most companies pass on the cost inflation to consumers, via a judicious blend of price hikes, packaged size reduction and change in product mix.

The top five FMCG companies constitute nearly 70% of the total revenues generated by this sector.

They tend to spend nearly 10% of their revenues on an average on advertising and promoting their products, which is the highest ad spend figure in the industry.

Challenges Faced by FMCG Companies

Products often cater to 3 distinct but usually wanted for aspects like necessity, comfort, luxury. They meet the demands of the entire cross section of population. Price and income elasticity of demand varies across products and consumers.

Individual items are of small value (small SKU's) although all FMCG products put together account for a significant part of the consumer's budget.

The consumer spends little time on the purchase decision. He seldom ever looks at the technical specifications. Brand loyalties or recommendations of reliable retailer/ dealer drive purchase decisions.

Limited inventory of these products (many of which are perishable) are kept by consumer and prefers to purchase them frequently, as and when required.

Brand switching is often induced by heavy advertisement, recommendation of the retailer or word of mouth.

Large domestic market.India is one of the largest emerging markets, with a population of over one billion.

India is one of the largest economies in the world in terms of purchasing power and has a strong middle class base of 300 million.

Around 70 per cent of the total households in India (188 million) resides in the rural areas.

India - a large consumer goods spenderAn average Indian spends around 40 per cent of his income on grocery and 8 per cent on personal care products. The large share of fast moving consumer goods (FMCG) in total individual spending along with the large population base is another factor that makes India one of the largest FMCG markets.

Porter’s Five Forces Model for FMCG

Company Overview Incorporated in 1933

HUL is the part of €40 billion Unilever Group

The group has more than 400 brands spanning 14 categories of (HPC) & (F&B) products

It has presence in more than 100 countries

Headquartered in Mumbai, national sales network with offices in 4 metro cities.

35 manufacturing locations across India.

Ratio AnalysisRatios Mar 09 Dec 08 Dec 07 Dec 06 Dec 05

EPS 11.46 8.12 6.98 6.15 5.45

Dividend payout(%) 750 900 600 500 500

Sales (%) 47.72 13.37 10.37 11.30 -1.68

Operating profit Margin (%) 14.46 14.95 14.74 14.14 15.32

PAT Margin(%) 11.40 11.84 11.67 11.19 10.91

Current Ratio 0.89 0.70 0.73 0.68 0.92

ROCE (%) 122.83 144.66 66.97 68.72 45.89

RONW 121.34 122.97 68.14 61.09 57.23

ROA 29.59 25.90 24.45 20.91 16.14

Inventory turnover 9.26 7.20 8.02 8.57 6.97

Debtors turnover 20.95 22.12 25.42 22.12 20.95

Nos of days in WC 1.58 -42.05 -36.37 -40.83 -6.56

Debt/Equity 0.20 0.06 0.03 0.02 0.70

Security Analysis Parameters Values

Avg. Weekly Return 0.58

Standard Deviation 3.56

Variance 12.64

Systematic Risk 0.76

Unsystematic Risk 11.88

Beta 0.2

Coefficient of Variation 6.10

Required Return - CAPM 0.50

asian paints

• Started in 1942 by four entrepreneurs: Champaklal choksey, Chimanlal choksey, Suryakant Dani and Arvind Vakil as “ASIAN OIL & PAINTS COMPANY.”

• Within three years, their turnover reached 3.5 lacs.

• In 1967, Asian paints became the 10th largest paint company in the world.

Barbados, Jamaica,

Trinidad & Tobago.

Caribbean Islands

Bahrain, Egypt,Oman &

United Arab Emirates.

Middle East

Fiji, Tonga, Vanuatu,

Solomon & Samoa Islands.

South Pacific

Bangladesh, Nepal & Sri

Lanka.

South AsiaChina, Malaysia,

Singapore & Thailand.

South East Asia

International Operations

Market Share in India

Asian paints

37%Good

lass

Nerolac 1

5.9

%Berge

r Pa

ints

13.8

%

Fundamental Analysis of Asian paints

Ratios Mar 09 Mar08 Mar 07 Mar 06 Mar 05EPS 37.78 39.12 28.36 19.58 18.09

Dividend payout(%) 175 170 130 125 95

Sales growth (%) 25.43 21.74 20.66 19.27 13.98

Operating Profit Margin (%) 12.39 12.96 13.09 14.41 11.80

PAT Margin 7.97% 10.28% 9.11% 7.59% 8.36%

Current Ratio 1.03 1.08 1.09 0.99 1.13

ROCE 49.35% 57.32% 49.68% 49.74% 43.36%

RONW(%) 33.10 40.40 36.56 30.18 30.32

ROA 16.51 18.55 17.50 14.54 14.71

Inventory Turnover 9.80 8.03 6.88 7.09 6.27

Debtors Turnover 16.02 14.74 14.03 14.65 14.31

Nos of days in Wrk Cap 33.13 43.11 32.72 36.49 31.76

Debt/Equity 0.06 0.08 0.14 0.12 0.11

Security Analysis of Asian Paint

Parameters ValuesAvg. Weekly Return 2.40


Variance 25.82



Beta 0.5



Britannia started in 1892 in kolkata.

In 1975, the Britannia Biscuit Company took over the distribution of biscuits from Parry's.

In the subsequent public issue of 1978, Indian shareholding crossed 60%, firmly establishing the Indianness of the firm.

Britannia today moved up to the 9th position in terms of its brand equity.

Today it has become an International company with various subsidiaries and Joint Ventures.

Britannia New Zealand Foods

Strategic Food International Co. Dubai

Al Sallan, Oman

Daily Bread Gourmet Foods (India)

International Bakery Products

J B Mangharam Foods

Manna Foods

Ganges Valley Foods

Sunrise Biscuit Company

BiscuitsBiscuits BreadBread CakeCake DairyDairy

Tiger Biscuits

Good Day

Bourbon

50 – 50

Treat

Milky Bikis

Nutrichoice

Marie Gold

Whole Wheat Bread

Daily Fresh Bread

Good Day Cakes

Chocolate Cakes

Fruit Cakes

Cheese

Milkman

Britannia is offering more value at affordable price points (Rs2, Rs4, Rs5) particularly in the current economic environment

It is commercializing the growing trend of 'out-of-home' consumption

Britannia is strengthening its brands through product design, delivery, mix and introducing differentiated products

Britannia has not increased product prices over the past 12 months

Increase in input cost can hurt the profit margins of the company

sugar and wheat prices have risen more than 40% over the past two years.

Fundamental Analysis of Britannia

Ratios Mar 09 Mar08 Mar 07 Mar 06 Mar 05

EPS 75.51 79.95 45.06 61.29 62.27

Dividend payout(%) 400. 180 150 150 140

Sales Growth (%) 20.26 17.66 28.36 7.92 10.27

Operating Profit Margin(%) 7.20 8.97 5.85 11.72 11.58

PAT Margin(%) 5.75 7.31 4.86 8.48 9.25

Current Ratio 0.84 1.07 1.17 1.22 1.27

ROCE 25.29 26.39 19.22 34.49 41.02

RONW 22.60 26.07 17.51 26.67 33.54

ROA -- 15.79 11.42 16.70 19.32

Inventory turnover 14.54 9.98 10.31 9.34 11.97


Nos of Days in WC 13.43 28.82 9.75 6.49 -9.59

Debt/Equity 0.03 0.14 0.01 0.02 0.01

Security Analysis of Britannia



Variance 21.62



Beta 0.22



One of the 8 Indian Companies to feature in ‘Forbes A-list’ for 2004

Only Indian FMCG Company to feature in Forbes 2000 List

Among top in : Sustained value creation (BT-Stern Stewart survey)Operating profitsCash Profits

Ranks No. 5 among Indian listed Private Sector Companies .No. 1 in FMCG Sector

Rated as one of India’s Most Respected Companies (IMRB-Businessworld Survey 2006)

ITC - Business Portfolio

ITC’s Cigarettes BusinessITC’s Cigarettes Business

Leadership in all segments - geographic & price

Extensive FMCG distribution network

World-class state-of-the-art technology and product

Exciting long term growth potential

Biri : Cigarettes ratio.

Per Capita Adult C igarette Consumption (Sticks)

16621753

561 488

141

1190

USA China Pakistan Nepal India W orld Avg.

ITC’s Hotel BusinessITC’s Hotel Business ITC-Welcomgroup : a leading hotel chain in India

• Established presence in key business locations

• Over 6000 rooms under 4 distinct brands

Capacity expansion underway at Bangalore and Chennai; plans for other locations also

being progressed. Positions on land taken at other locations such as Hyderabad and

Ahmedabad

Fastest growing hotel chain with highest operating efficiency (PBDIT/Net Income @

45%) amongst the 3 leading chains

Leverages unique service proposition and international alliance with Starwood Hotels

& Resorts

• ‘Luxury Collection’ / ‘Sheraton’

Category Brand PositioningLuxury ITC Hotel: Luxury Collection "Mansions of Luxury"Upper upscale WelcomHotel: Sheraton "Passion for Quality"Upscale - mid-scale Fortune Hotels "Promise of True Value"Heritage WelcomHeritage "Unique Experiences"

ITC’s Agri Commodity Business

Farm linkages in 14 states covering Soya, Wheat, Rice, Marine

products, Coffee etc.

Unique CRM programme in commodity exports

Leveraging IT for the transformational ‘e-Choupal’ initiative

Rural India’s largest Internet-based intervention

Over 38000 villages linked through around 6400 e-Choupals

servicing over 3.5 million farmers

Distinctive sourcing capability for ITC’s Foods business

ITC’s Paperboards & Packaging ITC’s Paperboards & Packaging businessesbusinesses

Capacity expansion projects installed

120000 TPA Pulp Mill – commissioning commenced; being stabilised

100000 TPA paper machine (to support Stationery business growth plans) –

production commenced. under stabilization stage (normal stabilization period is

6-9 months)

Results impacted by sharp increases in input prices

ITC’s packaging SBU -India’s largest converter of paperboard into high

quality printed packaging

Leading supplier to Indian FMCG and Consumer Electronic segments

Provides superior packaging solutions to the cigarettes and new FMCG

businesses

RATIO Analysis Ratios Mar 09 Mar08 Mar 07 Mar 06 Mar 05

D/E ratio 0.01 0.02 0.02 0.01 0.03

Sales growth (%) 6.8 13.95 25.67 28.83 18.61

Current ratio 1.42 1.36 1.33 1.25 0.97

RONW % 23.85 25.99 26.01 24.83 27.97

ROCE % 34.61 36.60 37.24 36.26 33.09

ROA 16.50 17.79 17.74 16.80 18.65

PAT % 29.18 28.44 34.05 35.98 28

Operating Profit Margin (%) 32.85 31.57 32.51 34.36 36.40

Operating profit % 32.85 31.57 32.51 34.36

Inventory turnover ratio 5.51 5.51 3.76 3.82 3.91

Debtors Turnover ratio 21.32 20.43 20.79 18.22 20.07

Nos of days in WC 62.19 52.39 49.56 40.51 6.12

EPS 8.65 8.28 7.18 5.95 88.28

Dividend Payout ratio(%) of FV 350 310 265 310 200

Security Analysis

Avg .weekly Return 0.98


Beta -0.096

Variance 14.40

Co-variance 3.89

Systematic risk 0.183


Required return as per CAPM -0.013

Leading consumer goods company in India with a turnover of Rs. 2834.11 Crore (FY09).

Wide and deep market penetration with 50 C&F agents, more than 5000 distributors and over2.8 million retail outlets all over India.

23 per cent growth in net sales in its Q1 2009-10

It also earmarks $250-500 Mn for overseas buys.

To set up second unit in Himachal Pradesh .

Dabur to unite ayurvedic, natural brands.

Invests Rs. 180 crore for new manufacturing facilities.

The firm plans to add 4-5 stores this fiscal and 10 stores each year from the next fiscal, he said.

Dabur- Business Portfolio

Key RatiosRatios MAR-09 MAR-08 MAR-07 MAR-06 Mar -05

Debt/Equity ratio 0.19 0.03 0.05 0.05 0.14

Sales growth (%) 15.03 19.97 29.7 9.29 13.3

Current ratio 1.19 0.91 0.97 0.82 0.67

PAT% 17.19 17.37 17.49 17.74




Nos of days in WC 41.32 -5.80 3.82 -10.28 -23.92


RONW % 51.20 61.58 62.52 42.22 43.78

ROCE % 47.98 67.51 66.07 46.69 42.85

EPS 4.32 3.67 2.92 3.30 5.17

Dividend Payout (%) 175 150 175 250 250

Security analysis

Avg weekly return 2.69


Beta 0.0034

Systematic risk 0.0002

Unsystematic risk 275.98

variance 275.972

Coeff. Of var 6.17

Return as per CAPM 0.1558

OverviewMarico's Products and Services in Hair care, Skin Care and Healthy Foods generated a Turnover of about Rs. 23.9 billion (about USD 478 Million) during 2008-09.

Product distribution worldwide.

One of the largest Indian companies*.

widespread distribution network of more than 2.5 Million outletsin India and overseas.

a CAGR of 24% in Turnover and 27% in Profits over the past 5 years-

Marico won 4 Awards for excellence in Employer branding & Advertising to Talent at the Remmy Awards 2009 {Saffola won Media Abby Gold for the World Heart Day Radio entry -"Radio goes silent" at the Goa Fest }

Fundamental Analysis of Marico

Ratios Mar 09 Mar08 Mar 07 Mar 06 Mar 05

EPS 2.33 2.35 1.88 17.05 12.72

Dividend payout(%) 65.50 65.50 65.50 62 53.50

Sales growth (%) 21.95 14.76 31.39 10.24 11.87

Operating profit Margin(%) 14.01 13.26 13.77 12.90 8.63

PAT Margin (%) 7.35 9.06 8.39 9.4 7.72

Current Ratio 1.48 1.65 0.90 1.33 1.59

ROCE (%) 38.80 33.60 46.72 21.47 28.79

RONW (%) 33.76 35.65 62.40 51.17 38.64

Inventory Turnover 8.22 8.48 8.39 10.7 10.12


Nos of days in WC 75.32 76.11 43.46 53.72 53.57

Debt/Equity 0.84 1.09 0.91 0.81 0.24

Key RatiosRatios MAR-09 MAR-08 MAR-07 MAR-06 Mar -05

Debt/Equity ratio 0.19 0.03 0.05 0.05 0.14

Sales growth (%) 15.03 19.97 29.7 9.29 13.3

Current ratio 1.19 0.91 0.97 0.82 0.67

PAT% 17.19 17.37 17.49 17.74




Nos of days in WC 41.32 -5.80 3.82 -10.28 -23.92


RONW % 51.20 61.58 62.52 42.22 43.78

ROCE % 47.98 67.51 66.07 46.69 42.85

EPS 4.32 3.67 2.92 3.30 5.17

Dividend Payout (%) 175 150 175 250 250

Security Analysis of Marico



Variance 15.97



Beta 0.064



Comparative Analysis

HUL Asian paints

Britannia ITC Dabur Marico

EPS 11.46 37.78 75.51 8.65 4.32 2.33

Inventory turnover

9.26 9.80 14.54 5.51 10.94 8.22

Debtors turnover

20.95 16.02 64.88 21.32 22.63 37.42

D/E 0.20 0.06 0.03 0.01 0.19 0.84

Current ratio

0.89 1.03 0.84 1.42 1.19 1.48

PAT% 11.40 7.97 5.75 29.18 17.19 7.35

ROCE% 122.83 49.35 25.29 34.61 47.98 38.80

EBIT% 13.86 12.39 6.08 28.38 17.11 13.06

Combined security analysisHUL Asian

paintsBritannia ITC Dabur Marico

Avg/weekly return

0.58 2.40 0.50 0.98 2.69 1.78

Beta 0.20 0.50 0.22 -0.096 0.0034 0.064

Standard dev

3.56 5.08 4.65 3.79 16.61 4.00

Variance 12.64 25.82 21.62 14.40 275.98 15.97

Coeff. Of var

6.10 2.12 9.28 3.89 6.17 2.24

Return as per CAPM

0.50 1.015 0.5306 -0.013 0.1558 0.260

fmcg final

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