Godrej Consumer Products - PAT comes below estimate; Maintain Add - BRICS

GCPL's Q3FY13 results were below our expectations, with revenue up 25.7% YoY to Rs17.0bn (vs. our estimate of Rs17.4bn), growth of 5.8% YoY in operating profit to Rs2.8bn (vs. our estimate of Rs3.1 bn) and increase of 1.1% YoY in APAT to Rs1.7 bn (vs. our estimate of Rs2.0 bn). The domestic business performed in line with expectations, though the international business' profitability came significantly below our estimate. We have revised our FY13 and FY14 estimates from Rs20.8 and Rs26.5 to Rs19.6 and Rs25.1 respectively to factor in GCPL's performance in Q3FY13. In line with the revision to our earnings estimates, we have revised our target price to Rs729 (Rs701 earlier). Maintain Add.

Growth driven by both domestic and international businesses: GCPL's revenue growth was driven by a growth of 21% YoY in domestic business and around 33% YoY in international business. Operating profit increased 5.8% yoy to Rs2.8bn, though operating margin declined by 320 bps to 16.8% YoY. A fall of 240 bps YoY in input costs was fully offset by a YoY increase of 220 bps, 240 bps and 110 bps in employee expenses, A&P spend and other expenses. PAT grew 3.1% yoy to Rs1.1 bn. Excluding exceptional items related to forex loss of Rs27mn in Q3FY13 and Rs59mn in Q3FY12, APAT was up 1.1% YoY to Rs1.7bn.

Revenue growth across categories: The robust growth in domestic business was led by an impressive performance in home insecticide and hair care categories. Home insecticide business grew 28% YoY (1.3x higher than industry growth) - driven primarily by innovative marketing campaigns, strong media investments and high incidents of malaria and dengue in the quarter. Personal wash category grew 20% YoY (0.8x higher than industry growth), led by new launches, while its volume was up 2% YoY. Hair care category exhibited an improvement with a growth of 17% YoY, though it was lower than industry growth of 21% YoY.

Maintain Add: We have revised our FY13 and FY14 estimates from Rs20.8 and Rs26.5 to Rs19.6 and Rs25.1 to factor in GCPL's performance in Q3FY13. In line with the change in our earnings estimates, we have revised target price to Rs729 (Rs701 earlier). Maintain Add.

Source : Equity Bulls

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