Power & FMCG support the markets

Thu, 10 Feb 09:30 am

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Asian markets have opened the day on a lackluster note. Benchmark indices in the region are trading down except for China, which is trading in the green with a 0.7% gain. Indonesia (down 2.2%), Malaysia (down 0.7%) and Hong Kong (down 0.7%) are the biggest losers. Indian markets have opened the day on a good note. Power and FMCG stocks are the leading gainers.

The BSE-Sensex is trading higher by around 14 points (0.1%), while the NSE-Nifty is up by around 11 points (0.2%). Mid and small cap stocks are trading in the negative, however, with the BSE Midcap and BSE Small cap indices down by about 0.3% each. The rupee is trading at 45.55 to the US dollar.

Stocks in food & beverage sector have opened the day in the positive zone. Britannia industries and ITC are the leading gainers. Britannia announced its 3QFY11 results last evening. The company has reported a 23% YoY growth in net sales during the quarter. Sales during 9mFY11 have grown by 25% YoY. Led by lower advertising and other costs, its operating margins have improved to 5.1% during the quarter, from 4.3% in 3QFY10. Subsequently, led by a good growth in net sales and better operating margins, Britannia's net profits increased by 28% YoY during the quarter. However, for 9mFY11, profits are down by 25%. This has largely been due to the weak performance during the first half of the fiscal. Overall, the good growth in sales and improvement in operating margins despite rising raw material prices suggest Britannia's pricing power in a highly competitive industry. It will now be interesting to note whether the company is able to take its margins further up, in line with what it has earned in the past (around 7-8%).

BPCL has announced its 3QFY11 results. The company's top line has increased by 14% YoY during the quarter. For the 9 month period, sales have increased by 25% YoY. The growth in sales during the quarter was on account of 6% YoY increase in volumes. The operating margins for the quarter remained stable at 2%. The increase in sales was offset by a 14% YoY increase in expenses due to higher crude prices, staff costs as well as higher forex losses. The gross refining margin for the 9 month period stood at US$ 3.63 per barrel, which is a 34% YoY increase from US$ 2.7 per barrel seen during the same period last year. The net income declined by 51% YoY during the quarter. This was mainly on account of lower other income as well as an increase in the tax expenses for the company. For the 9 month period, BPCL has received Rs 83 bn as compensation from the upstream companies for selling diesel, petrol, kerosene and LPG below the market price. The stock of the company is currently trading in the red. Other energy companies trading in the red are ONGC, Gail and Indian Oil. However, HPCL is trading in the green.