We welcome your support in Asiamoney Brokers Poll.

Please CLICK HERE to vote. Sector Update

FMCG
COVID and Inflation; the two demons to be slayed!
Investment rationale
In this report we have attempted to analyze; raw material cost trend, price hikes,  DABUR’s international market exposure is more immune to COVID
and impact of COVID uncertainty on Indian FMCG companies. Our primary In international market, out of 23 countries where Indian FMCG companies have
observations and conclusions are as follows; (i) raw material cost for edible oil, maximum exposure; 88% countries have already witnessed either 3rd or 4th wave.
packaging material and paint-related-products (TIO2, VAM etc) rose significantly Also, around 61% countries are witnessing meaning full decline in number of
during 1QFY22; category leaders (MRCO in Edible Oil, HUL in soaps) have taken daily COVID cases. Dabur’s exposure to international market is relatively more
larger price hikes compared to 2nd/3rd brand to protect margins (ii) in international immune compared to other FMCG companies in India (exhibit 15).
market; 88% of the regions, where Indian FMCG company has significant business
 India to unmask by Dec’21; expect discretionary segment to recover faster
presence, have already witnessed 3rd/4rth wave and is now more stable; we
Based on current vaccination rate (at 28 lakh doses per day) and government of
observe that subsidiaries of DBUR are relatively more immune to COVID
India target of vaccinating adult population by Dec 21, the discretionary
disruptions as most of the countries where the company has presence are
consumption, led by increase in the mobility of people at malls and other public
witnessing significant decline in number of daily COVID cases. (iii) We expect
places will improve significantly. And thus the recovery in companies having
normalization of mobility and lockdown by end of Dec’21; this would help business
exposure to discretionary segments (apparel, juices, cola drinks paints etc.) to be
recovery of TRENT, TCNS, DMART, JUBI to accelerate. In our coverage universe;
faster in 2HFY22. We also concur with the view that there will be significant
DMART, BRIT and GCPL are our preferred pick.
normalization of mobility and lockdown by Dec’21 as India is most likely to
 Top executors to drive outperformance achieve 80% vaccination rate; this would help business recovery for TRENT,
During 2nd COVID wave the strategy of micro-containment used by India has TCNS, DMART, JUBI FOOD to faster than expected.
helped FMCG companies to report better business recovery compared to the
 Top picks; DMART, BRIT, GCPL
strategy of blanket-lockdown during the 1st wave. We observe that; post COVID
We like DMART, BRIT, and GCPL amongst our coverage universe. We believe
crisis companies which are top executors (HUL, BRIT, DABUR, GCPL, MRCO,
DMART is a classic case of a platform company; as it is creating an expensive-
APNT, DMART, JUBI, TRENT) outperformed competition (exhibit 18). We expect
platform (DMART owns the land parcel and does its own construction) where
these companies to continue outperformance as India moves to gradual
manufacturers can keep their products while customers can buy it. We believe,
unlocking.
DMART can compound revenue/EPS growth at 25-30% over next 25 years. In
 Inflationary pressure continues; price hikes taken in 1QFY22 to support margin
case of BRIT; we are bullish on the company’s approach to drive premiumization
On raw material, cost of packaging material and edible oil witnessed major
in the value segment through milk-bikis portfolio. Poor people love to indulge in
inflation (+40-62% YoY) during 1QFY22. FMCG companies have taken price hikes
cheap luxury; we expect BRIT to drive success in premiumization through top-
to offset any impact on margin. We note that; category leaders (MRCO, HUL)
class execution. On GCPL; we are bullish on turnaround of South Africa business
have taken larger price hikes compared to 2nd/3rd brand (exhibit 2 to 10). We
while HI business in India likely to continue growth momentum.
understand this symbolizes the power of brand.
July 2, 2020
 FMCG | Sector Update

Exhibit 1: Valuation Table

CMP TP Mkt Cap Revenue (Rs mn) EPS (Rs) PER (x) EV/EBITDA (x) RoE(%) RoCE(%)
Companies
(Rs) (Rs) Reco (Rs mn) FY22E FY23E FY22E FY23E FY22E FY23E FY22E FY23E FY23E FY23E
Hindustan Unilever Ltd 2,477 2,607 ACCUMULATE 58,19,345 5,19,301 5,72,603 42.9 47.4 57.5 52.1 39.8 35.9 21.4 23.5
Asian Paints Ltd 3,023 2,444 HOLD 28,99,943 2,49,371 2,83,788 38.5 44.4 77.6 67.3 50.4 43.7 24.6 29.1
ITC Ltd 203 274 BUY 24,98,695 5,27,584 5,80,426 12.8 14.0 15.9 14.4 12.5 11.2 27.3 30.0
Avenue Supermarts Ltd 3,315 3,502 BUY 21,47,049 3,07,874 4,30,447 26.1 38.1 128.2 87.7 84.6 57.2 16.2 20.9
Nestle India Ltd 17,642 16,195 HOLD 17,00,928 1,52,949 1,70,974 260.6 294.4 65.6 58.0 43.2 38.2 97.2 74.9
Dabur India Ltd 590 526 HOLD 10,43,033 1,09,551 1,18,948 10.3 11.7 55.4 48.7 43.2 37.1 22.7 23.9
Godrej consumer products ltd 888 961 ACCUMULATE 9,08,325 1,22,061 1,31,621 19.9 21.3 43.8 40.7 30.3 28.1 20.2 24.5
Britannia Industries Ltd 3,594 4,395 BUY 8,65,572 1,44,055 1,58,637 79.0 87.9 46.2 41.5 34.5 30.6 37.8 34.2
Berger Paints Ltd 809 628 SELL 7,85,389 79,891 93,370 9.3 11.4 87.0 70.5 52.7 43.4 25.9 29.6
Marico Ltd 535 450 ACCUMULATE 6,90,375 88,343 97,886 9.7 11.2 54.5 47.2 39.4 33.9 37.7 40.9
Jubilant Foodworks Ltd 3,113 2,774 HOLD 4,10,780 47,126 54,530 38.8 50.5 79.4 61.0 33.4 27.1 31.1 26.8
Kansai Nerolac Ltd 572 599 ACCUMULATE 3,08,208 55,155 64,022 12.1 15.0 46.7 37.6 30.3 24.4 16.4 20.5
Trent Ltd 858 559 SELL 3,04,955 37,234 44,348 6.0 7.5 142.1 114.0 42.0 32.5 11.1 8.3
TCNS Clothing Co Ltd. 576 476 SELL 35,458 10,819 13,615 13.5 15.9 42.7 36.2 15.2 10.2 16.4 11.1
Source: Company, IDBI Capital Research

4
 FMCG | Sector Update

Inflationary pressure continues; but price hike is also following up

 On raw material; we observe that cost of packaging material and the edible oil basket continues to witness
significant amount of inflation during 1QFY22. Price of LDPE and Polypropylene rose by 62%YoY in 1QFY22. In edible
oil basket; price of copra and palm oil increased by 37% and 46% YoY respectively.
 Raw material cost inflation in paint sector also continues to rise as the price of TIO2, VAM and Acetic Acid rises by
13%, 22% and 164% YoY in Q1FY22.
 We note that companies have already taken price hikes in 4QFY21 and is likely to take more hike in 1QFY22 to offset
inflationary pressure;

 MRCO has already taken 30% price hike in 2HFY21 and 15-20% hike in 1QFY22 for Saffola brand. In parachute
brand; MRCO has taken 9% price hike in 2HFY21.
 BRIT expects to take 3% price hike to offset inflation in material cost primarily coming from edible oil, packaging
material and rise in diesel cost.

 DABUR has taken 3% price hike in 4QFY21 and expects to take 2nd round of hike in 1QFY22.
 APNT has taken 2.8% price hike in 1QFY22
 BRGR has taken 2.2-2.5% price hike in the month of May’21. The company expects more price hike in coming
months.

 KNPL has taken 3-8% price hike in industrial coating products; 8% hike in Powder Coating, 5% hike in refinish and
3% hike in general industrial coatings.
 Based on our survey of SKUs that we conduct on monthly basis, we observe following;

 MRCO has taken price hike c. 300bp higher than competition in edible oil basket (Saffola vs Fortune) during Jan-
Jun’21. This reflects brand power of Saffola as a brand. Saffoly enjoys c. 81% volume market share in premium
edible oil category.
 In Soap’s portfolio we note that HUL has taken price hike of c. 17% which is c. 900bp higher compared to
competition (GCPL, Reckitt B., Patanjali, Private Labels)
 In Shampoo segment; HUL has taken 8-10% price hike over Jan-June’21

5
 FMCG | Sector Update

 In tea; we observe that HUL has been laggard in taking price hike compared to Tata Consumer. Over last six
months; HUL has taken c. 5% price hike while Tata Consumer has taken price hike in 1-2 SKUs only.

Exhibit 2: Cost of packaging material trend (%YoY)

Financial year FM LDPE ($/ton) Polypropylene ($/ton)
2020 Q1 -14.71% -11.21%
Q2 -18.69% -16.21%
Price of LDPE and Polypropylene has Q3 -21.55% -16.02%
risen significantly over last 3 quarters Q4 -18.37% -14.08%
2020 Total -18.27% -14.38%
2021 Q1 -25.68% -26.64%
Q2 -4.66% -11.51%
Q3 15.69% 7.95%
Q4 35.19% 38.74%
2021 Total 3.45% 0.52%
2022 Q1 62.84% 61.55%
Source: Bloomberg, IDBI Capital Research

6
 FMCG | Sector Update

Exhibit 3: Food related raw material cost basket (%YoY) trend Exhibit 4: Edible oil raw material cost basket (%YoY) trend
Tea Coffee Milk Powder Mentha Paraffin Palm Malaysian
FY FM Barley Wheat Sugar FY FM Copra Groundnut PFAD
Index Index - Delhi oil Wax oil Palm oil
2020 Q1 24% 12% 11% 13% NA 33% 2020 Q1 11% 22% -20% 6% 3% -10% -17%
Q2 14% 9% 2% 11% NA 64% Q2 -7% 17% -17% -24% -6% -13% -7%
Q3 11% 10% 5% 12% NA 69% Q3 -14% 7% 36% -24% -20% -3% 30%
Q4 8% 7% 2% -8% NA 58% Q4 -26% 20% 46% -23% -21% 20% 34%
2020 Total 14% 9% 5% 7% NA 56% 2020 Total -9% 16% 8% -17% -11% -2% 8%
2021 Q1 -14% 1% -1% -13% NA 9% 2021 Q1 -27% 36% 24% -18% -16% 18% 15%
Q2 -25% -13% -1% 26% NA -11% Q2 -15% 24% 50% -22% -14% 25% 37%
Q3 -32% -19% -3% 32% -11% -17% Q3 -2% 32% 42% -21% -6% 28% 35%
Q4 -26% -14% -2% 26% -3% -12% Q4 31% 28% 41% -17% -4% 25% 46%
2021 Total -25% -12% -2% 17% -7% -9% 2021 Total -5% 30% 39% -20% -10% 24% 34%
2022 Q1 21% -4% 3% 17% 13% -5% 2022 Q1 37% 14% 90% -14% -2% 46% 92%
Source: Bloomberg; IDBI Capital Research Source: Bloomberg; IDBI Capital Research

Exhibit 5: Raw material cost for paint industry is up by 20% over last 3-4 quarters Exhibit 6: Break up of raw material cost basket for paint industry
125 122 TIO2 (Rs Turpentine Oil Acetic Acid Glacial VAM (INR /
Paint Industry Raw Material Cost Index FY FM
120 /kg) Rs/ltr or KG price Rs/KG ($/MT) USD)
115
2020 Q1 6% 28% -27% -11% 4%
110
Q2 1% 17% -43% -11% 0%
105 102
99 Q3 -6% 16% -32% -5% -1%
100 Q4 -9% 2% -12% 1% 3%
95 2020 Total -2% 15% -30% -7% 1%
90 2021 Q1 -8% -4% 6% -2% 9%
85 Q2 -4% 2% 4% -4% 6%
80 Q3 2% 10% 18% -3% 4%
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Q4 10% -18% 68% 2% 1%
FY20 FY21 FY22 2021 Total 0% -3% 24% -2% 5%
2022 Q1 13% -2% 164% 22% -3%
Source: Bloomberg; IDBI Capital Research Source: Bloomberg; IDBI Capital Research

7
 FMCG | Sector Update

Exhibit 7: Brand wise edible oil price increase over last 6 months (June 2021 vs Jan 2021)
% price hike
Company Brand Product Quantity
Jan-Jun’21
Adani Wilmar Fortune Fortune Filtered Groundnut Oil 1L 20%
5L 14%
Fortune Plus Soya Health Oil 1L 19%
Fortune Rice Bran Health Oil 1L 26%
In edible oil; we note that MRCO has 5L 38%
taken price hike which is more than Fortune Sunlite Refined Sunflower Oil 1L 32%
competition. We believe, this is positive 5L 32%
for MRCO as it symbolizes power of Marico Parachute Parachute Coconut Oil 1L 5%
brand. MRCO commands >80% market Saffola Saffola Active Oil 1L 21%
share in premium edible oil. 5L 27%
Saffola Gold Oil 1L 33%
5L 32%
Saffola Tasty Oil 1L 45%
Saffola Total Oil 5L 13%
Source: IDBI Capital Research

Exhibit 8 : In Shampoo’s price increase by the players over last 6 months (June 2021 vs Jan 2021)
HUL Brands Quantity Jan'21 June'21 % increase (over the period) Product
Clinic Plus Strong & Long Health Shampoo 340 ml 175 189 8% Clinic plus
Sunsilk Lusciously Thick & Long Shampoo 340 ml 198 215 9% Sunsilk

In shampoo; there is an price increase of Sunsilk Stunning Black Shine Shampoo 340 ml 198 215 9% Sunsilk
8-10% over last six month Dove Daily Shine Shampoo 340 ml 240 255 6% Dove
Dove Hair Fall Rescue Shampoo 340 ml 240 255 6% Dove
Sunsilk Stunning Black Shine Shampoo 650 ml 450 500 11% Sunsilk
Sunsilk Lusciously Thick & Long Shampoo 650 ml 450 500 11% Sunsilk
Dove Hair Fall Rescue Shampoo 650 ml 550 590 7% Dove
Dove Daily Shine Shampoo 650 ml 580 590 2% Dove
Source: IDBI Capital Research

8
 FMCG | Sector Update

Exhibit 9: Price increase over last 6 months in Soap category (June 2021 vs Jan 2021)
Company Brand Product Quantity % inflation
Godrej Consumer Cinthol Cinthol Cool Soap 3x125 gm 5%
Cinthol Original Deodorant & Complexion Soap 4x100 gm 9%
Godrej Godrej No. 1 Lime & Aloe Vera Soap 3x150 gm 7%
Godrej No. 1 Sandal & Turmeric Soap 3x150 gm 7%
Hindustan Unilever Hamam Hamam Neem Tulsi and Aloe Vera Soap Bar 150 gm 10%
Lifebuoy Lifebuoy Total 10 Soap 5x125 gm 9%
3x100 gm 8%
In soap; we observe than HUL has taken
3x125 gm 16%
price hikes higher than competition
Liril Liril Lemon & Tea Tree Oil Soap 3x125 gm 27%
Lux Lux Soft Glow Rose & Vitamin E Beauty Soap 3x150 gm 18%
Lux Velvet Glow Jasmine & Vitamin E Beauty Soap 3x150 gm 18%
Lux Fresh Splash Water Lily & Cooling Mint Soap 3x150 gm 25%
Reckitt B. Dettol Dettol Intense Cool 2X Menthol Soap 4x125 gm 10%
J&J Johnson's Johnson's Baby Soap 3x100 gm 5%
Patanjali Patanjali Patanjali Neem Kanti Soap 75 gm 20%
Other Brands BB Dhanthak's BB Detergent Soap 600 gm 8%
Chandrika Chandrika Ayurvedic Soap 3x125 gm 4%
Jo Jo Lime Soap 4x150 gm 6%
Medimix Medimix Ayurvedic Classic 18 Herbs Soap 3x125 gm 23%
4x125 gm 8%
Mild & Clear Soap with Glycerin 5x100 gm 5%
Mysore Mysore Luxury Bath Soap 3x150 gm 5%
Mysore Sandal Soap 3x150 gm 5%
Average 11%
Source: IDBI Capital Research

9
 FMCG | Sector Update

Exhibit 10: Tea segment price increase over the last 6 months (June 2021 vs Jan 2021)
Company Brand Product Quantity % hike Jun'21
Hindustan Unilever Brooke Bond Brooke Bond Red Label Natural Care Tea 1 kg 7%
Hindustan Unilever Brooke Bond Brooke Bond Red Label Natural Care Tea 500 gm 3%
Hindustan Unilever Brooke Bond Brooke Bond Red Label Natural Care Tea 250 gm 7%
Hindustan Unilever Brooke Bond Brooke Bond Red Label Tea 1 kg 4%
Hindustan Unilever Brooke Bond Brooke Bond Red Label Tea 500 gm 4%
Hindustan Unilever Brooke Bond Brooke Bond Red Label Tea 250 gm 8%
Hindustan Unilever Brooke Bond Brooke Bond Taj Mahal Tea 500 gm 6%
Hindustan Unilever Lipton Lipton Green Tea Powder 250 gm 6%
TGBL Tata Tata Tea Teaveda 250 gm 0%
TGBL Tata Tea Tata Tea Agni 1 kg 0%
TGBL Tata Tea Tata Tea Agni 500 gm 0%
TGBL Tata Tea Tata Tea Agni 250 gm 0%
TGBL Tata Tea Tata Tea Gold 1 kg 0%
TGBL Tata Tea Tata Tea Gold 500 gm 5%
TGBL Tata Tea Tata Tea Gold 250 gm 0%
TGBL Tata Tea Tata Tea Premium 1 kg 0%
TGBL Tata Tea Tata Tea Premium 500 gm -7%
TGBL Tata Tea Tata Tea Premium 250 gm -4%
TGBL Tetley Tetley Long Leaf Green Tea Powder 250 gm 20%
Source: IDBI Capital Research

Inflation outlook; management expects cost inflation to subside in 2HFY22. Management commentary on inflation
outlook are as follows;
 MRCO expects inflation in edible oil to start subsiding from Jul’21 onwards as there is no major increase in the
demand of the raw material; increase in current price is due to supply constraints and speculation in
international market. MRCO expects copra price to decline driven by improvement in seasonal supplies.
 DABUR expects commodity prices to taper off in 2HFY22 hence expects margin loss in 1st and 2nd quarter of
FY22 to be offset in 2HFY22.
 KNPL hints at supply tightness as chief reason for raw material cost to reach at peak. The company expects cost
to normalize with improvement in supply.

10
 FMCG | Sector Update

DABUR to outperform in international market

 We note that in the international market (c.23 countries) where Indian FMCG companies have maximum exposure;
61% countries are already witnessing meaningful decline in number of daily COVID cases. Positively, 88% countries
have already experienced either 3rd or 4rth COVID wave. We observe that; ever since the start of vaccination drive,
there has been significant control over the rise in number of new COVID cases.
 We expect; DABUR to outperform in international geography as the top 5 country (where DABUR has 86% of total
international market revenue ) is experiencing either flat or declining number of new COVID cases. In case of GCPL;
Indonesia and South Africa is struggling with 3rd wave and rising number of daily new COVID cases. Similarly,
Bangladesh and Vietnam which are major geographies for MRCO also facing 4rth/3rd wave and rising number of
daily new COVID cases.

Exhibit 11: FMCG Industry in India; country-wise revenue break-up (FY15-20) Exhibit 12: COVID Trend in top 7 countries where FMCG companies have highest
exposure
South Africa, 4% Top 7 countries COVID Cases Deaths Recovered Covid wave Daily new casesRecovery rate Mortality rate

Bangladesh, 4% Indonesia 21,78,272 58,491 18,80,413 3rd Wave Rising 86% 3%

Indonesia, 20% Nepal 6,38,805 9,112 5,96,132 3rd Wave Declining 93% 1%
UK, 5% UAE 6,32,907 1,811 6,11,442 4rth Wave Flat 97% 0%
USA 3,45,40,845 6,20,249 2,90,26,688 4rth Wave Declining 84% 2%
UK 48,00,907 1,28,140 43,24,876 4rth Wave Rising 90% 3%
USA, 9%
Bangladesh 9,13,258 14,503 8,16,250 4rth Wave Rising 89% 2%
Nepal, 16% South Africa 19,73,972 60,647 17,48,042 3rd Wave Rising 89% 3%
India 3,04,11,634 3,99,475 2,94,88,918 2nd Wave Declining 97% 1%
UAE, 14%

Source: Company; IDBI Capital Research Source: Company, IDBI Capital Research, worldometers.info

11
 FMCG | Sector Update

Out of 23 countries where FMCG Exhibit 13: 23 countries; stages of COVID daily cases Exhibit 14: 23 countries; no. of wave
companies from India are engaged in Flat, 9%
1st Wave, 3% 2nd Wave,
business activity, we note that; 9%
Rising, 30%
- 61% countries are witnessing
meaningful decline in no. of daily
covid cases
rd
- 88% countries already witnessed 3 4rth Wave,
39%
or 4rth COVID Wave 3rd Wave,
Declining,
- Post the start of vaccination drive, 61%
48%
most of the countries have
experienced decline/stabilization of
no. of new COVID cases Source: wordometers.info, IDBI Capital Research Source: wordometers.info, IDBI Capital Research channel check

Exhibit 15: DABUR; country wise revenue and PAT margin (FY15-20) and COVID trend Exhibit 16: MRCO; country wise revenue and PAT margin (FY15-20) and COVID trend
DABUR % Total Revenue PAT margin % Wave No. Daily Covid Cases Marico % Total Revenue PAT margin % Wave No. Daily Covid Cases
UAE 38% 13% 4rth Wave Flat
Bangladesh 43% 21% 4rth Wave Rising
Nepal 17% 7% 3rd Wave Declining
USA 13% 1% 4rth Wave Declining
Vietnam 26% 9% 3rd WAve Rising
Turkey 10% 3% 3rd Wave Declining
Egypt 8% 16% 3rd Wave Declining
UAE 19% -3% 4rth Wave Flat
UK 5% 22% 4rth Wave Rising
Bangladesh 2% 9% 4rth Wave Rising
South Africa 8% 1% 3rd Wave Rising
Sri Lanka 2% -3% 3rd Wave Declining
Nigeria 2% -2% 2nd wave Declining
Egypt 5% -26% 3rd Wave Declining
Pakistan 2% 5% 3rd Wave Declining
Source: Company, IDBI Capital Research, worldometers.info Source: Company, IDBI Capital Research, worldometers.info

12
 FMCG | Sector Update

Exhibit 17: GCPL; country wise revenue and PAT margin (FY15-20) and COVID trend
Godrej Consumer % Total Revenue PAT margin % Wave No. Daily Covid Cases
Indonesia 39% 7% 3rd Wave Rising
South Africa 7% -1% 3rd Wave Rising
Mauritius 6% 57% 3rd Wave Declining
Nigeria 5% 0% 2nd wave Declining
Kenya 5% -5% 3rd Wave Declining
USA 5% 6% 4rth Wave Declining
UAE 5% 19% 4rth Wave Flat
UK 4% 18% 4rth Wave Rising
Argentina 4% 5% 4rth Wave Declining
Mozambique 4% 14% 3rd Wave Rising
Lebanon 3% 26% 3rd Wave Declining
Malaysia 3% 100% 2nd Wave Declining
Chile 3% 11% 4rth Wave Declining
Netherland 1% 91% 4rth Wave Declining
Ghana 1% -2% 3rd Wave Declining
Bangladesh 1% -21% 4rth Wave Rising
Tanzania 1% -10% 1st Wave Declining
Sri Lanka 1% -9% 3rd Wave Declining
Source: Company, IDBI Capital Research

13
 FMCG | Sector Update

Impact of 2nd wave has been limited on FMCG; expect non-essentials to pick-up by
Dec’21

 The strategy of micro-containment during 2nd COVID wave (vs blanket-lockdown during 1st wave) has significantly
reduced overall impact on demand and distribution of FMCG products in FY22. Even though localized restrictions
created last mile supply chain disruptions, factories were allowed to operate on a normal basis.
 Based on management discussion; we understand that this time; FMCG companies don’t expect impact on overall
consumption demand to be as severe as the 1st wave. As per DABUR; demand momentum in the month of Mar’21
continued in Apr’21 and the company expects any loss in business during May-Jun’21 to be quickly recovered in the
following months. Contrast this with the 1st lock down (Mar25-31 2020) wherein revenue of top FMCG companies
declined by 8-12% YoY in 4QFY20.
 Companies which has developed strength in e-commerce channel like JUBI got less impacted during the 2nd wave;
DOMINOS business recovery stood at 94% in Apr’21 and 88% in May’21.
 Ever since COVID hit us; since last 5 quarters, we observe that companies which are top executors have
outperformed the peers. Few glaring examples are; JUBI outperformed Westlife, DMART outperformed in retail
sector, Trent and VMART outperformed ABFRL. Similarly; HUL, BRIT and GCPL outperformed other companies in
FMCG universe. In paint sector; APNT outperformed BRGR and KNPL.

14
 FMCG | Sector Update

Exhibit 18: Revenue growth trend post COVID: BRIT is leading amongst FMCG pack, APNT in Paint, DMART in retail
and JUBI in QSR
st
Post the 1 covid wave; recovery in Revenue (%YoY) 2020 2020 2021 2021
FMCG sector has been fastest followed 1Q 2Q 3Q 4Q Total 1Q 2Q 3Q 4Q Total
by the paint sector. In retail sector other
FMCG 5% 5% 4% -8% 1% -5% 7% 10% 24% 9%
than DMART, rest of the companies
HUL 7% 7% 3% -9.39% 1% -7% 3% 7% 21% 6%
continues to be impacted by localized
Britannia 6% 6% 5% 2.45% 5% 27% 12% 6% 9% 13%
store-lockdowns as they fall under non-
GCPL -5% -1% 2% -12.18% -4% -1% 11% 10% 27% 11%
essential category. QSRs exited FY21
Dabur 9% 4% 7% -12.35% 2% -13% 14% 16% 25% 10%
with positive revenue growth; driven by
Marico 7% 0% -2% -7.02% 0% -11% 9% 16% 34% 10%
increase in revenue share from delivery
and takeaways. ITC 4% 3% 3% -11.17% 0% -21% -4% 0% 23% -1%
Nestle 11% 9% 9% 10.73% 10% 2% 10% 9% 9% 7%
Paints 14% 6% 1% -8.38% 3% -46% 6% 24% 43% 5%
APNT 16% 9% 2% -7.13% 5% -43% 6% 25% 43% 7.4%
Berger 16% 7% 5% -7.96% 5% -46% 9% 25% 50% 7.1%
KNPL 6% -4% -8% -14.32% -4% -59% 4% 18% 35% -5.1%
Retail 22% 20% 21% 12.52% 19% -53% -28% -1.4% 12% -17.0%
JUBI vs MC’D; during COVID era;
DMART 27% 22% 24% 23.05% 24% -34% -12% 10% 18% -3.6%
revenue growth of JUBI outperformed
Trent 30% 33% 32% 8.09% 26% -87% -45% -17% 7% -35.6%
Westlife in every quarter. These are
TCNS 18% 0% 10% -24.58% 0% -88% -55% -28% -2% -45.2%
signs of top-class execution. JUBI is our
ABFRL 8% 14% 12% -5.11% 8% -85% -56% -20% -2% -41%
top pick in QSR sector.
VMART 25% 20% 21% -3.45% 16% -83% -44% -16% 6% -35%
QSR 10% 12% 15% 2.47% 10% -64% -27% -7.4% 17% -20.5%
JUBI 10% 12% 14% 3.77% 10% -60% -18% -0.22% 21% -14.2%
Westlife 12% 13% 17% -0.86% 10% -75% -47% -24.92% 6.29% -36%
Source: Company, IDBI Capital Research

15
 FMCG | Sector Update

Exhibit 19: Dominos sales recovery in the month of Apr-May’21

nd
Dominos sales recovery during 2 Covid
wave is significantly better (at 87-90%)
st
compared to 1 wave at 40-50%

Source: Company, IDBI Capital Research

16
 FMCG | Sector Update

India to unmask in next 5-6 months by Nov-Dec’21; expect discretionary business to recover faster
 As per research, once 70-80% population gets vaccinated, countries are more likely to return back to “life as we
know it (without; sanitizers, masks and social distancing)”. Government of India has, , set the target of completing
adult vaccination by Dec’21.
 In India; 86 crore population is above 18 years. Assuming 80% people needs to be vaccinated to achieve herd
immunity, the target population to be vaccinated is c. 77 crore. As on today’ 33.6 crore people (43% of target
population) received at least one dose. Hence, the remaining 44 crore population at the rate of 28 lakh doses
per day is likely to take 5-6 more months (July-Dec’21) to reach at 80% vaccination level.
 We understand that, similar to other countries globally, few states/cities in India are likely to reach the magic 70%
vaccination rate earlier than other states driven by better execution of vaccination drive. The case study of New York
sets a look-alike example;
 On June’15th, after 15 months of pandemic induced lockdowns, New York is back to "Life as we know it" as 70%
of the adult population got at-least 1 dose of vaccine. Except for 30% population who are non-vaccinated,
everyone else is allowed to unmask.
 However, recently, China has raised the threshold for herd-immunity from 70% to 85% driven by lower efficacy of its
vaccines. Hence, the possibility of negative surprise w.r.t deadlines for reaching 100% normalcy in India cannot be
ruled out. However, given that India is following the strictest of the lockdown globally, we are hopeful that chances
of negative surprise (on meeting deadlines for normalcy) should be minimal.
 Restoration of normalcy and improvement in mobility of people will help discretionary companies; which has higher
exposure to revenue from Malls (apparel retailers, fast food chains), on the go consumption (beverages; cola drinks,
juices etc); to recovery faster during 2HFY22.

17
 FMCG | Sector Update

Exhibit 20: On stringency index; India ranks highest at 82 points

On stringency index India ranks top

amongst all other countries globally….in
other words, India chooses “JAAN” over
“JAHAAN”

Source: Ourworldindata; IDBI Capital Research

18
 FMCG | Sector Update

Exhibit 21: Daily new COVID cases in India

Daily COVID cases is now under strict

control

Source: worldometer; IDBI Capital Research

19
 FMCG | Sector Update

Notes

Dealing (91-22) 6836 1111 dealing@idbicapital.com

Key to Ratings Stocks:

BUY: Absolute return of 15% and above; ACCUMULATE: 5% to 15%; HOLD: Upto ±5%; REDUCE: -5% to -15%; SELL: -15% and below.

IDBI Capital Markets & Securities Ltd.

Equity Research Desk
6th Floor, IDBI Tower, WTC Complex, Cuffe Parade, Colaba, Mumbai – 400 005. Phones: (91-22) 2217 1700; Fax: (91-22) 2215 1787; Email: info@idbicapital.com
SEBI Registration: BSE & NSE (Cash & FO) – INZ000007237, NSDL – IN-DP-NSDL-12-96, Research – INH000002459, CIN – U65990MH1993GOI075578
Compliance Officer: Christina D’souza; Email: compliance@idbicapital.com; Telephone: (91-22) 2217 1907

Disclaimer
This report has been published by IDBI Capital Markets & Securities Ltd. (hereinafter referred to as “IDBI Capital”) for private circulation. This report should not be reproduced or copied or made available to others. No person associated with IDBI Capital is obligated to call or
initiate contact with you for the purposes of elaborating or following up on the information contained in this report. The information contained herein is strictly confidential and meant for solely for the selected recipient and may not be altered in any way, transmitted to copied
or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without the prior written consent of IDBI Capital.
Recipients may not receive this report at the same time as other recipients. IDBI Capital will not treat recipients as customers by virtue of their receiving this report.
The information contained herein is from the public domain or sources believed to be reliable, but we do not make any representation or warranty that it is accurate, complete or up-to-date and it should not be relied upon as such. While reasonable care has been taken to
ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. In so far
as this report includes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed.
Opinions expressed are current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis, the information discussed in this material, IDBI Capital, its directors, employees are under no obligation to update or keep the
information current. Further there may be regulatory, compliance, or other reasons that prevent us from doing so.
Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
IDBI Capital, its directors and employees and any person connected with it, will not in any way be responsible for the contents of this report or for any losses, costs, expenses, charges, including notional losses/lost opportunities incurred by a recipient as a result of acting or non-
acting on any information/material contained in the report.
This is not an offer to sell or a solicitation to buy any securities or an attempt to influence the opinion or behavior of investors or recipients or provide any investment/tax advice.
This report is for information only and has not been prepared based on specific investment objectives. The securities discussed in this report may not be suitable for all investors. Investors must make their own investment decision based on their own investment objectives,
goals and financial position and based on their own analysis.
Trading in stocks, stock derivatives, and other securities is inherently risky and the recipient agrees to assume complete and full responsibility for the outcomes of all trading decisions that the recipient makes, including but not limited to loss of capital.
Opinions, projections and estimates in this report solely constitute the current judgment of the author of this report as of the date of this report and do not in any way reflect the views of IDBI Capital, its directors, officers, or employees.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or
which would subject IDBI Capital and associates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this report
may come are required to inform themselves of and to observe such restriction.
E-mail is not a secure method of communication. IDBI Capital cannot accept responsibility for the accuracy or completeness of any e-mail message or any attachment(s).
This transmission could contain viruses, be corrupted, destroyed, incomplete, intercepted, lost or arrived late. IDBI Capital, its directors or employees or associates accept no liability for any damage caused, directly or indirectly, by this email.

20
 FMCG | Sector Update

Analyst Disclosures
We, Varun Singh, Kuber Chauhan, hereby certify that the views expressed in this report accurately reflect our personal views about the subject companies and / or securities. We also certify that no part of our compensation were, are or would be directly or indirectly related to
the specific recommendations or views expressed in this report. Principally, We will be responsible for the preparation of this research report and have taken reasonable care to achieve and maintain independence and objectivity in making any recommendations herein.

Other Disclosure
IDBI Capital Markets & Securities Ltd. (hereinafter referred to as “IDBI Capital”) was incorporated in the year 1993 under Companies Act, 1956 and is a wholly owned subsidiary of IDBI Bank Limited. IDBI Capital is one of India’s leading securities firm which offers a full suite of
products and services to individual, institutional and corporate clients namely Stock broking (Institutional and Retail) , Distribution of financial products, Merchant Banking, Corporate Advisory Services, Debt Arranging & Underwriting, Portfolio Manager Services and providing
Depository Services. IDBI Capital is a registered trading and clearing member of BSE Ltd. (BSE) and National Stock Exchange of India Limited (NSE). IDBI Capital is also a SEBI registered Merchant Banker, Portfolio Manager and Research Analyst. IDBI Capital is also a SEBI registered
depository participant with National Securities Depository Limited (NSDL) and is also a Mutual Fund Advisor registered with Association of Mutual Funds in India (AMFI).

IDBI Capital and its associates IDBI Bank Ltd. (Holding Company), IDBI Intech Ltd. (Fellow Subsidiary), IDBI Asset Management Ltd. (Fellow Subsidiary) and IDBI Trusteeship Services Ltd. (Fellow Subsidiary).

IDBI Group is a full-serviced banking, integrated investment banking, investment management, brokerage and financing group. Details in respect of which are available on www.idbicapital.com IDBI Capital along with its associates are leading underwriter of securities and
participants in virtually all securities trading markets in India. We and our associates have investment banking and other business relationships with a significant percentage of the companies covered by our Research Department. Investors should assume that IDBI Capital and/or
its associates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material. IDBI Capital generally prohibits its analysts, persons reporting to analysts, and their dependent family members having a financial
conflict of interest in the securities or derivatives of any companies that the analysts cover. Additionally, IDBI Capital generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the
analysts cover. Our sales people, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses
may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Directors of IDBI
Capital or its associates may have interest in the Companies under recommendation in this report either as Director or shareholder. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is
provided herein. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general
information of clients of IDBI Capital. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should
consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any
investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. We and our associates, officers, directors, and employees, including persons involved in the preparation or issuance of this material,
may from time to time have “long” or “short” positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. For the purpose of calculating whether IDBI Capital and its associates holds beneficially owns or controls, including
the right to vote for directors, 1% of more of the equity shares of the subject issuer of a research report, the holdings does not include accounts managed by IDBI Asset Management Company/ IDBI Mutual Fund.

IDBI Capital hereby declares that our activities were neither suspended nor we have materially defaulted with any Stock Exchange authority with whom we are registered in last five years. However SEBI, Exchanges and Depositories have conducted the routine inspection and
based on their observations have issued advice letters or levied minor penalty on IDBI Capital for certain operational deviations. We have not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has our certificate of registration been
cancelled by SEBI at any point of time. IDBI Capital, its directors or employees or associates, may from time to time, have positions in, or options on, and buy and sell securities referred to herein. IDBI Capital or its associates, during the normal course of business, from time to
time, may solicit from or perform investment banking or other services for any company mentioned in this document or their connected persons or be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker
in the financial instruments of the company(ies) discussed herein or their affiliate companies or act as advisor or lender / borrower to such company(ies)/associates companies or have other potential conflict of interest. This report may provide hyperlinks to other websites.
Except to the extent to which the report refers to the website of IDBI Capital, IDBI Capital states that it has not reviewed the linked site and takes no responsibility for the content contained in such other websites. Accessing such websites shall be at recipient's own risk. IDBI
Capital encourages the practice of giving independent opinion in research report preparation by the analyst and thus strives to minimize the conflict in preparation of research report. Accordingly, neither IDBI Capital nor Research Analysts have any material conflict of interest at
the time of publication of this report. We offer our research services to primarily institutional investors and their employees, directors, fund managers, advisors who are registered with us. The Research Analyst has not served as an officer, director or employee of Subject
Company. We or our associates may have received compensation from the subject company in the past 12 months. We or our associates may have managed or co-managed public offering of securities for the subject company in the past 12 months. We or our associates may
have received compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. We or our associates may have received any compensation for products or services other than investment banking or merchant
banking or brokerage services from the subject company in the past 12 months. We or our associates may have received any compensation or other benefits from the Subject Company or third party in connection with the research report. Research Analyst or his/her relative’s
may have financial interest in the subject company. IDBI Capital or its associates may have financial interest in the subject company. Research Analyst or his/her relatives does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of
the month immediately preceding the date of publication of Research Report. IDBI Capital or its associates may have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research
Report. The Subject Company may have been a client during twelve months preceding the date of distribution of the research report. Price history of the daily closing price of the securities covered in this note is available at www.bseindia.com; www.nseindia.com and
www.economictimes.indiatimes.com/markets/stocks/stock-quotes.

21