Top 5 FMCG Stocks - Strong Fundamental - Stock to Buy Now

 Hi, I Saumya Manna welcome you to the moneydiving.com and today we will discuss top 5 FMCG companies by market cap. With the industry and drivers, then the companies, some financials, and their business. 


Top 5 FMCG Stocks


What is meant by FMCG sector

FMCG or fast-moving consumer goods is the 4th largest sector in India with a market size of $110 billion in 2020 and is expected to rise to $220 billion by 2025 and can see the potential of growth in this industry. FMCG products are distributed in urban with 55% contribution and 45% in rural. 


What the FMCG industry comprises

The first is household and personal care that contributes 51% and includes oral care, haircare skincare, cosmetics, perfumes, hygiene products, fabric wash and other household products. 


The next is healthcare that contributes 31% and includes over the counter products like pain tablets, pain balms, antiseptic creams, glucose powders, medicated dressings, etc. 


The third is food and beverages that contribute 19% and includes health beverages, staples, bakery, chocolates, icecreams. So these 3 sectors make up the whole FMCG industry and these are the products involved. 


Growth Drivers of the Industry

Now it is important to understand the factors that will derive growth in the industry. The first is the shift from the unorganized sector to the organized and this structural change is happening nd hence due to the shift, the market share of the existing companies are expected to rise. 


The second lever is rapid urbanization and is expected to see more growth in India As urbanization increases, the consumption of FMCG also increases as it contributes 55% and rural 45%. The third lever is the scope of high penetration, there are many products that are not in full use but recently we have seen a demand for products famous in abroad like the instant breakfast sector. 


Similarly, there are many products that can drive the industry as their demand rises. The next is the rural consumption growth, as the per capita increases, the consumption does too. The last is the easy access, we have observed the accessibility of products even in villages So growth can be seen as the penetration increases. So these are the 5 factors that can derive growth in the industry.


1. Hindustan Unilever Ltd

So the first company is Hindustan Unilever Ltd or HUL whose market cap is 5 lakh 50 thousand crores due to which it is the biggest company of all, let me now show you their business 9 out of 10 household use HUL products, with 25% operating margin, and executed the largest M&A.


So from here you would have gotten to know the penetration, now let me show you their segments. The company is a market leader in skin cleaning, skincare, haircare, tea, ketchup, household and health foods. 


So let us now look at some of its financials, the important ratios in the FMCG industry are OPM NPM, asset turnover ratio, etc. So here you can see the performance of numbers contributing to ROE. The net margins have increased from 15% in 2019 to 17% in 2021. 


The asset turnover has decreased from 2.11 to 0.68 and the financial leverage has remained constant at 2.46 The PE ratio of HUL is around 68 which is higher as compared to the industry. 


2. Nestle India

The next company is Nestle India whose market cap is 1 lakh 70 thousand. Nestle is a subsidiary of Switzerland that has been operating in India for a long time and has the famous product Maggi. 


Let us see the growth rate in the sectors, Nestle operates The first is milk products whose 1-year growth rate has been 8.9%, 11.4% in prepared dishes and cooking aid 7% in confectionery and 0.9% in powdered and liquid beverages. 


Milk products and nutrition contribute 45.8% in the company's total revenue followed by 30.1% by the prepared dishes and cooking aid, 13.6% by confectionery. 


Now let us see the financials that showcase the contribution to its ROE Its 10-year sales CAGR is 8%, 10-year profit CAGR at 10%, current PE ratio at 78 as compared to the industry at 60. 


Their net margin was 14% in 2018 and was 16% in 2020, asset turnover improved from 1.40 to 1.69. The financial leverage improved from 2.28 to 4.01 and ROE in Dec 2020 was 106% 


3. Dabur India ltd

The next company is Dabur ltd whose market cap is around 80,000 Crores with annual revenue of around 8700 Crores. The company's legacy dates back to 130 years and people trust their products a lot. 


As you can see the different business segments of the company. The first is healthcare, then HPC, products that contain real fruit juices. 


Let us now see the revenue breakup of the company, the major revenue in FY21 came from HPC which is household personal care products that contribute 47.9% in the total revenue 39% by healthcare, 13.1% by food and beverages if I see the growth as compared to FY20. Healthcare saw a growth of 31.9%, HPC at 9.5% and food and beverages at 5.9%. 


4. Godrej Consumers Product

The next is Godrej Consumers with a market cap of more than 80,000 Crores and is considered one of the oldest brands Let me show you their business segments, with personal wash giving 22% of the total revenue followed by haircare at 31%, household insecticides at 28%, air care at 8%, and others at 11%. 


The company has currently used their cinthol brand soap to enter in the healthcare segment So here they are using an existing brand to enter in new segment by bringing a 99.9% germ-killing soap. 


Let us now see the growth rates, 10-year sales CAGR is 12% and 10-year profit CAGR is 14% And its PE ratio is at 49 which is less as compared to the industry. 


5. Britannia Industries

The last company in our list is Britannia Industries whose legacy is more than a 100 years and some of the famous biscuits like tiger, good day that are household names. 


Its market cap is more than 80,000 Crores, its PE ratio is 46 The company's OPM always stays above 15% and is 18-19% annually which is a very healthy number. 


An interesting fact is that the company has a huge 17% stake of FIIs and has increased in the past The 10-year sales CAGR is at 11% and its 10-year profit is at 30%, meaning they have grown exceptionally.


This article only for information and educational purpose before invest consult advisor.


To read more also Dixon Technologies Analysis - Share Price Target 2021


This article ends here

.

.

.

Good Luck :)

Post a Comment

1 Comments

  1. Iam quite happy with the fmcg stocks improvement and earned good from that

    ReplyDelete