Glaxosmithkline Consumer Healthcare - 3QCY2012 Result Update - Angel Broking

For 3QCY2012 Glaxosmithkline Consumer Healthcare Ltd (GSK Consumer) posted an 13.4% yoy growth in its net sales, aided by a ~6% volume growth and 10% price growth in the domestic business. During the quarter, the overall sales growth was affected by 8% yoy decline in the sales to canteen stores division (CSD).

Key highlights of the quarter: The company's major brands in the malted food drink (MFD) division - Horlicks and Boost posted a volume growth of 4.5% and 8.5% respectively. In value terms Horlicks and Boost grew by 16% yoy and 22% yoy respectively, while biscuits too posted a strong 29% yoy growth. Despite the increase in prices of raw materials such as wheat flour (up 13% yoy), malted barley (up 6% yoy), SMP (up 7% yoy) and sugar (up 20% yoy) gross margin rose by 39bp yoy, due to the higher prices charged by the company during the quarter. The OPM rose by 59bp yoy to 17% aided by higher gross margin and lower other expenses. The bottom-line rose by 24.8% yoy due to superior operating performance and higher business auxiliary income of Rs.28cr (up 27% yoy) and higher interest income of Rs.26cr (up 36.8% yoy).

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 current market price, the stock is trading at 23.2x CY2013E EPS of Rs.131.7. We continue to remain Neutral on the stock.

Source : Equity Bulls

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