GSK Consumer - 1QCY2012 Result Update - Angel Broking

For 1QCY2012 GSK Consumer posted a 14.5 yoy growth in its net sales, aided by a 7% volume growth and 8% value growth. The company's major brands in malted food drink (MFD) division Horlicks and Boost posted volume growth of 9.4% and 2.1% respectively. During the quarter sales was to an extent affected by stoppage of orders from Canteen Sales Division (CSD) during February and March, which contributes around 8% of overall sales. Adjusted for lower CSD sales implied volume growth stands at 9.5%. We maintain our Neutral view on the stock.

Key highlights of the quarter: GSK consumer recorded an 58bp yoy decrease in its operating margin to 19.9% due to inventory pipeline and higher input costs. However, lower advertising costs (down 120bp yoy) propped up the company's margins to a considerable extent. The company's advertising expenditure in 1QCY2011 included spends on now discontinued brands such as Nutribar.

Earnings for the quarter grew by 19.3% yoy to Rs.132cr (Rs.111cr) aided by higher other income (up 40.8% yoy), business auxiliary income and lower tax rate. Outlook and valuation: We expect the company's MFD division to continue to post double digit growth, aided by the company's effort to strengthen its distribution network. At the CMP, the stock is trading at 22.5x CY2013E EPS of Rs.123.2. We continue to remain neutral on the stock.

Source : Equity Bulls

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