- Edelweiss expects Britannia's revenue, EBITDA, PAT to rise by 18.9 per cent, 25.2 per cent and 48.6 per cent YoY, respectively, in Q1FY21
- Likely divergence in volume growth among consumer goods companies - United Spirits to suffer a contraction of 64 per cent YoY
- ITC's FMCG business is expected to report 10 per cent YoY revenue growth on a base of 6.6 per cent YoY growth
- COVID-19 has dragged consumer staples' volume growth to historical lows: down 24.4 per cent YoY in Q1FY21 from a downtick of 7.7 per cent YoY in Q4FY20.
Coronavirus pandemic has brought eating out at restaurants or tucking into a tangy vada pav at a street stall to a complete halt. As more and more people have stayed indoors, they have not only cooked much more, they have also binged quite a bit on biscuits, snacks as well as noodles and pasta. This explains why the recent Edelweiss report on consumer product companies predicts a more robust growth for food companies such as Britannia, Nestle and ITC Foods. Edelweiss expects Britannia's revenue, EBITDA and PAT to jump 18.9 per cent , 25.2 per cent and 48.6 per cent YoY, respectively, in Q1FY21.
The company's volume growth is expected to be ~17 per cent YoY on a base of 3 per cent (Q4FY20 saw flattish volume growth on a base of 7 per cent). "There is more demand as compared to supply. Biscuits have also been an easy-to-reach-out product for migrant workers in their long struggle to reach home in the absence of public transport," the report says. While ITC's revenue, EBITDA and PAT is expected to dip by 18 per cent, 40.1 per cent and 26.4 per cent YoY respectively, its FMCG business (which includes its food business) is expected to report 10 per cent YoY revenue growth on a base of 6.6 per cent YoY growth.
Similarly, Nestle's revenue, EBITDA and PAT, as per the Edelweiss report, would grow 7.3 per cent, 10.2 per cent YoY and 19.3 per cent YoY, respectively. Nestle is likely to see growth of 7.5 per cent YoY in domestic revenues on a base of 13.1 per cent YoY (Q1CY20 saw 10.7 per cent YoY domestic revenue growth on a base of 10.2 per cent YoY growth).
As far as the overall consumer goods universe is concerned, the Edelweiss report predicts that revenue, EBITDA and PAT would dip 18.7 per cent, 28.9 per cent YoY and 21.2 per cent YoY in Q1FY21 vis-a-vis contractions of 6.7 per cent, 8.6 per cent and 9.4 per cent YoY in Q4FY20, respectively. While packaged food companies have benefited, the lockdown hurt liquor, cigarette, skin care, hair care, and ice creams. Even branded essentials in food, health and nutrition, household insecticides and hygiene categories have gained. "Street should be and will be more concerned about the June pickup rather than entire Q1FY21 as April and May were severely impacted due to logistical and labour issues," says the report.
Meanwhile, COVID-19 has dragged consumer staples' volume growth to historical lows: down 24.4 per cent YoY in Q1FY21 from a downtick of 7.7 per cent YoY in Q4FY20. Overall, with supply chains restored and a likely rural recovery, the Edelweiss report expects the sector to record positive growth beginning Q2FY21. However, there is likely to be a wide divergence in volume growth among consumer goods companies. While Britannia on one end of the spectrum is expected to report about 17 per cent YoY volume uptick, United Spirits is likely to suffer a contraction of 64 per cent YoY. "Overall, we estimate an average volume dip would be 24.4 per cent YoY in Q1FY21," the report further adds.
Edelweiss, however, expects most consumer companies to report positive growth for the balance part of the financial year. "Several government initiatives and a good monsoon will supplement farmers' incomes, which should prop up rural growth from Q2FY21," says the report.