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Godrej Consumer Products - Results marginally below our estimates; maintain Add - BRICS
Posted On : 2012-11-06 19:59:52( TIMEZONE : IST )
GCPL's results were marginally below our estimates, with revenue up 35% yoy to Rs16.0bn (vs. estimate of Rs15.3bn), operating profit up 17.5% yoy to Rs2.5bn (vs. estimate of Rs2.6bn), operating margin down 220bps yoy to 15.6% and APAT up 15.1% yoy to Rs1.7bn (vs. estimate of Rs1.8bn). We have revised our FY13 EPS estimate from Rs22.6 to Rs20.8 and maintained our FY14 EPS estimate at Rs26.5. In line with the revision to our earnings estimates, we have revised our price target to Rs701 (from Rs637 earlier), valuing GCPL at 26x - in line with Marico and Dabur. Maintain Add.
Growth driven by domestic and international businesses: GCPL's revenue growth was driven by a yoy increase of 19% in the domestic business and around 63% in the international business. Operating profit was up 17.5% yoy to Rs2.5bn, though operating margin was down 220bps yoy to 15.6%. A fall of 20bps yoy in input cost was fully offset by a yoy decline of 150 bps, 40 bps and 50 bps in employee expenses, A&P spend and other expenses. PAT increased 25% yoy to Rs1.6 bn. Excluding exceptional items related to forex losses (Rs76mn) in Q2FY13 and Rs174mn in Q2FY12, the APAT increased 15% yoy to Rs1.7bn
Revenue growth across categories: Growth in domestic business was driven by a yoy growth of 20% in home insecticides (1.5x market growth), 24% in soaps and 10% in hair colour. Re-launches and a sharp increase in A&P spend led to a double digit growth across categories.
Soap business - volume growth normalises: GCPL's soap business reported a volume growth of 6% yoy for the quarter, which was lower than the volume growth (24% yoy) in Q1FY13, but was still encouraging, considering - (1) better than category performance and (2) unfavourable base effect. We attribute the volume growth to calibrated price hikes, new launches & re-launches, shift in market share from small & unorganized players to GCPL, and increased advertising & promotional activities.
Maintain Add: We have revised our FY13 EPS estimate from Rs22.6 to Rs20.8 and maintained our FY14 EPS estimate at Rs26.5. We have revised our price target to Rs701 (from Rs637 earlier), valuing GCPL at 26x in line with Marico and Dabur. Maintain ADD.
