http://investorguide360.com/aig/personal-finance/consumerism-leading-consumer-sector-of-pakistan-topline-research/Consumerism leading consumer sector of Pakistan – Topline Research
Though KSE 100 has showed an impressive return of 36% since the start of the year, consumer stocks have outshined the benchmark by 12%. Limited float is often cited, but we believe consumer stock out performance is also on account of phenomenal earning growth of the last few years. Our sample that consists of 23 companies (as illustrated by accompanying table) has depicted a strong sales and earning growth of 20% and 19% in last 4-years (2009-2012). Further, extrapolating 2012 earnings are expected to grow by 35%, which we believe have culminated into recent upsurge in stock prices.
Evidence from the strong consumer dynamics also comes from performance of wholesale and retail sector. Where Pakistan went through one of the lowest growth periods in last 5-years (FY08-09), the sector has grown by an average 3.1%.Consumerism: behind consumer stocks jubilee
The growth story comes from increased consumerism that stems from i) demographic changes, ii) growing middle class and iii) rising health awareness. With above regional average population growth of 2%, and sixth largest population (179mn), increasing urbanization and improving communication/distribution means, Pakistan is always been a heaven for consumer goods.
Further, decreasing family size, improving literacy rate and women inclination to work are further augmenting households to shop more and increasing middle class base. Hygiene awareness due to increasing literacy is bringing food sector turn over as people are shifting from unregulated unpacked food products.Mid-cap lifted consumers to 48% return
Contrary to the general perception of large cap stock driving the sector, analysis revealed that mid and small cap stocks are major gainers. During the period, Mitchell led the way by 331% return followed by National Food (269%), Noon Pakistan (228%) and EFOODS (221%). Our analysis reveals that in variant order these are the same companies that have depicted highest 4 year earning CAGR. Therefore, we believe that though these companies are marked by low free float (12% against KSE average of 25%) profitability growth was also the major factor.