The fall in crude price augurs well; RM trends were mixed for agri-commodities. We haven’t seen any meaningful pricing action/incremental promotional activity across categories.
Kotak estimates consumer universe (ex-ITC) performed broadly in line with markets, up 5% over the past month. The fall in crude price augurs well; RM trends were mixed for agri-commodities. We haven’t seen any meaningful pricing action/incremental promotional activity across categories. We retain our ‘tread selectively’ stance; top picks: JUBI, ITC, CLGT, MRCO and VBL.
> Home care: Reckitt has increased the price of Harpic toilet cleaner by 5%. Other than this, no pricing action/incremental promotional activity in detergents, dish wash and other home care categories.
> Personal care: No pricing action/incremental promotional activity in skin cleansing, skin care, oral care products, hair oils and shampoos and other personal care categories. Prices of most shampoos, soaps and body washes are flat y-o-y. Most other categories (oral care, skin care, hair oils and face wash) have witnessed price increases at some point of time in the past 12 months.
> Food/beverages: We witnessed price increases in select SKUs of Nescafe (Nestle) and Bru Gold (HUVR). Instant coffee prices have increased by 3-12% across brands and SKUs over the past three months, Dabur has increased the price of Chyawanprash by 5%, ITC has increased price of Aashirvaad multi-grain as well as whole wheat Atta by 4%. Pricing and promotional activity is largely stable in biscuits, tea, juices and edible oils.
Agri commodities remained mixed in April. Domestic tea prices saw a modest 2% m-o-m decline post a sharp 27% m-o-m rise in the previous month. Liquid milk prices saw a sharp increase of 14% m-o-m as water scarcity in a few regions weighed on milk output. However, strong international supply continues to weigh on SMP prices. Sugar prices were up 4% m-o-m. ISMA expects a deficit in the global sugar market in the next season (starting October 2019).
Sector (KIE consumer universe) underperforms the broader markets
Our overall consumer marginally underperformed broader markets over the past month, posting gains of 3% (5% ex-ITC) while the broader market was up 6%. Key stocks that outperformed were TGBL (up 23%), NEST (up 13%), JYL (up 12%), TTAN (sup 11%) and BRIT (up 10%). Key underperformers were ITC (down 6%), Page (down 5% and a 2% fall in each SHKL and BAJAJCON. On a 12-month basis, the sector is underperforming the broader markets, posting 4% absolute return versus 11% return for the broader markets. Our preferred picks – JUBI, ITC, MRCO and VBL.