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Food Sector

- - - - - Food Sector FOOD

24 replies to this topic

#1
Amin Khan

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    Food sector provides solid 129% return in Jul-Jun11

    A review of the consumer food industry of Pakistan (FMCGs), which shows a massive growth in the last fiscal year, along with its future outlook.

    Demand driving bottomline growth
    Usually, consumer goods business is directly linked to the national economy and the growing demographics of the population. Key demand drivers in this sector include, increasing per capita income, rapid urbanization and widening retail packaged product penetration. At the same time, favorable demographics of Pakistan, which are growing around 2.1% per year amid half of the people being under 20-year of age, signifies tremendous untapped potential in the industry. Similarly, food industry of Pakistan shows a massive growth in last few years especially on account of massive flood that devistated the country last year and the immediate demand for food products for the flood-affectees rose.

    Bottmlines growing at a massive scale, expected to grow further
    As a result, bottomline of the sample of 5 major food companies (Nestle, Uni Lever, Uni Lever Foods, Rafhan Maize and National Foods) continued to grow at a significant rate while posting a massive growth of 50% YoY during the last quarter (Jan-Mar11). The topline of the sample also posted over 30% YoY growth during the same quarter mainly on account of double-digit inflation in the country alongside volumetric growth despite persistent power outages and other supply-side cost issues. Therefore, gross margin expansion of the sample also took place albeit with 26bps to 29.1% during the quarter. As far as individual company are concerned, National Foods showed impressive profits during the last quarter, posting 65% YoY growth, followed by Unilever Pakistan 54% YoY, Nestle 50% YoY (see table).

    We expect similar growth pattern for the Jun-11 end quarter as well as full-year CY11 on account of 1) continued double-digit inflation (especially in food) 2) lower overall taxes especially the GST and tax on beverages and food items 3) gov’t stance to tax untaxed and counterfeit products and 4) increased pensions and salaries of the gov’t employees as mentioned in the budget FY12. However, rising inflation, poor security situations and power outages may adversely impact the consumer industry of Pakistan.

    Food industry outperforms KSE100 massively, Nestle continues to shine
    Capital market-related performance of the same food sample is also no short of interesting sights as the market values of the same sample followed the massive improvement in the economic fundamentals of this industry. Commendably, food sector (the sample) has so far posted a colossal return of 129% since Jun-10, securing top slot amongst others while massively outperforming KSE100 (that provided a return of 24% FY11YTD). Within the food sector, Nestle has been a shinning star all along as it provided so far a gigantic appreciation in its market capitalization of almost 200% since Jun-10, followed by Rafhan Maize and National Foods punching in 134% and 78% return respectively by far (see table alongside). We have a positive stance on the sector while put ULEVER under review for now.
    (InvestCap)
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    #2
    Amin Khan

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    Food sector gives highest returns at bourse
    Published: June 29, 2011


    KARACHI: The food sector has posted a whopping return of 129 per cent in the current financial year so far, securing top slot amongst other sectors while massively outperforming the benchmark KSE-100 index that provided a return of 24 per cent.

    Within the sector, Nestle has been a shining star all along as it provided a gigantic gain in its market capitalisation of almost 200 per cent since Jun-10 followed by Rafhan Maize and National Foods punching in 134 per cent and 78 per cent returns, respectively, according to an InvestCap research note.

    Profits growing at a phenomenal pace

    Profits of the five major food companies – Nestle, Unilever, Unilever Foods, Rafhan Maize and National Foods – continued to grow at a significant rate while posting a massive growth of 50 per cent during the previous quarter (January to March 2011). Sales also posted over 30 per cent growth during the same quarter mainly on account of double digit inflation in the country alongside volumetric growth despite, says the note.

    As far as individual company are concerned, National Foods showed impressive profits during the preceding quarter, posting 65 per cent growth followed by Unilever Pakistan’s 54 per cent and Nestle’s 50 per cent. A similar growth pattern is expected for the current quarter as well on account of continued double-digit inflation and government’s stance to tax counterfeit products, adds the note.
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    #3
    STOCK.DEPENDENT

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    #4
    Amin Khan

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    #5
    Lion Heart

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    Food exports increase by 17.58% in Jul-Dec 2012

    ISLAMABAD: Food exports have increased by 17.58 percent during the first half of current fiscal year as against the same period of last year.

    The overall food exports during July-December 2011-12 were recorded at $1.888 billion against $1.605 billion during July-December 2010-11, according to data of Pakistan Bureau of Statistics. The products that contributed positively from food group included wheat, whose exports increased by 100 percent during the period with $94.274 million against nil last year.

    Similarly, the exports of leguminous vegetables (pulses) increased by 100 percent from nil last fiscal year to $11.513 million during the first half of 2011-12, the date revealed.

    Other commodities, whose exports witnessed positive growth, included fish and fish preparations from $131.941 million last year to $153.682 million during the current year showing an increase of 16.48 percent.

    During the period under review, the exports of fruits increased by 8.94 percent from $132.839 million to $144.714 million while those of tobacco increased from $6.988 million last year to $11.513 million, showing an increase of 64.75 percent. app

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    Regards
    Imran Mughal

    #6
    Amin Khan

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    FMCG’s: Growth potential justified by numbers
    A profitability review of the listed FMCGs of Pakistan, which shows a massive growth in 1QCY12 (Jan-Mar12), along with its outlook.

    Profitability continue to ride North
    Despite of certain challenges faced by the country, FMCG sector looks immune to any thing in this regard and profitability of the companies are moving forward with a decent pace. Our sample of the consumer goods companies (Nestle, UniLever Pak, UniLever Foods, Engro Foods, Rafhan Maize and National Foods) continues to shine, posting a healthy revenue growth of 21% YoY during 1QCY12. This trickled down to the bottomline which grew with the same pace . On consolidated basis, bottomline of the companies posted 21% YoY growth in earnings during the same period. On QoQ basis, consumer industry witnessed revenue growth of 10% to Rs54bn. However, due to sharp increase in energy cost during the quarter (Gas, electricity, petrol and diesel up on average 9% QoQ) gross margin remain under strain down by 52bps QoQ to 28.1% in 1QCY12. At the same time, aggressive marketing and sales expenditure by the companies resulted in 28% QoQ increase in distribution and marketing expense to Rs6.8bn.
    As far as individual companies are concerned, Engro Foods showed impressive profit after tax, posting a massive 309% YoY growth in 1QCY12, followed by National foods 180% YoY, Unilever Pakistan foods 26% YoY, Unilever Pakistan 9% YoY and Nestle 8% YoY.

    FMCGs return at par with KSE-100 on QoQ
    On the back of improving fundamentals and blessing of solid corporate results, KSE-100 index performed well during the 1QCY12. On QoQ basis, our sample companies return and the benchmark returns progressed in the same direction by posting 21% return during the 1QCY12. in our sample, FMCG scrip's EFOODS leads the ship as the scrip provides solid 108%QoQ return, which than followed by National Foods 64% and Nestle 24% QoQ in 1QCY12. However on YoY basis, FMCGs outperform the bench mark index by posting 36% YoY return during the first quarter of CY12, as compared to bench-mark returns of only 17% YoY.

    Outlook and Recommendations
    Regardless of certain economic, political and external challenges, there are still many rationalize to stay 'Optimistic' on FMCG sector of the country. The increasing urbanization (enhancing demand of packaged products), double digit inflation, (resulting in high prices pass on to the consumer), increased in employed labor force, higher per capita income, and notably more than 50% of the population lies under 20yrs of age (who are the main target market of these companies) provides a sustainable future growth in volumes. Therefore, we continue with our likeness towards FMCG sector. As far as valuations are concerned, we are in the process of making EFOODS financial model, and we will initiate our coverage on the company soon, while at current levels we have 'Sell' call on ULEVER with Dec-12 TP of Rs4,887/sh.
    (InvestCap)
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