Godrej Consumer Products - Results ahead of estimates; maintain Add - BRICS

GPCL's results surpassed estimates, with revenue up 29.8% yoy toRs17.2bn (vs. estimate of Rs16.4bn), operating profit up 11.6% yoy to Rs2.8bn (vs. estimate of Rs2.9 bn) and APAT up 24.8% yoy to Rs2.1bn (vs. estimate of Rs1.8 bn). Performance of domestic business was satisfactory, though lower profitability reported by international business was disappointing. We have revised our FY14 EPS estimate from Rs25.1 to Rs25.3 and introduced our FY15 EPS estimate at Rs31.7. We now arrive at a revised target price of Rs856 (27x), as we roll over to FY15 estimates. Maintain Add.

Growth driven by domestic and international businesses: GPCL's revenue was driven by growth of 18% yoy in domestic business and around 23% yoy in international business. Operating profit increased 11.6% yoy to Rs2.8bn, though operating margin declined 270 bps yoy to 16.2%. A fall of 160 bps yoy in input costs was fully offset by a yoy rise of 220 bps, 120 bps and 90 bps in other expenses, A&P spend and employee expenses. PAT increased 73.4% yoy to Rs3.3 bn. Excluding exceptional items related to forex loss and gains related to divestment of the food business, APAT grew 24.8% yoy to Rs2.1bn

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 grew 26% yoy (2.1x industry growth) - driven by innovative marketing campaigns, strong media investments and synergies from distribution network. Sales of personal wash category grew 17% yoy, (1.3x industry growth), led by new launches, while volume was up 4% yoy (vs. industry growth of 1% yoy). Hair care showed an improvement, with a sales growth of 27% yoy - almost double the industry growth.

Maintain Add: We have revised our FY14 EPS estimate from Rs25.1 to Rs25.3 and introduced our FY15 EPS estimate at Rs31.7. We now arrive at a revised target price of Rs856 (27x), as we roll over to FY15 estimates. Maintain Add.

Source : Equity Bulls

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