Consumer players being in for another lean year was the sector’s theme as portrayed in our equity strategy A Year of Selectivity issued on 20 January 2019. In that report, we stated that “margin expansion will be hindered by yet another wave of subsidy cuts, while improvement in volumes could be slow” and “market interest in consumer names will depend on how their new product launches will perform in the new year.” Fast forward to today, consumer players have underperformed the stock market on a ytd basis so far in 2019. The underperformance was well detected through the total return of two sector leaders, OLFI and DOMT, whose performance amounted to -3.3% and -4% ytd, respectively, compared to EGX 30’s +7.3%. In our opinion, this negative reaction by the sector is provoked by its weak Q1 2019 results, while market anxiety to the expected wave of subsidy cuts only added fuel to the fire.
For more details, please read the full report below.