GSK Consumer (SKB IN) - Subdued revenue growth - CSEC Research

Subdued revenue growth

- Net Sales grew by 1.4% YoY to INR 9.6bn, volume de-grew by 3% YoY during the quarter. Sales impacted due to demonetization as the distributor and trade pipeline which accounts for ~50% of the sales. Domestic sales grew by 2% YoY. Value Market share of Horlicks stood at 44.8%, Horlicks extension stood at 16.5% and Boost at 11.2%. To drive Consumption Company continues its brand building initiatives and campaign around micronutrient deficiency and summer campaign.

- The business service auxiliary commission for 4QFY17 grew by 8%.

- Gross margin (net of excise duty) marginally fell by 136bps YoY to 60%. Employee expenses fell by 340bps YoY; while A&P and other expenditure inched up by 133bps YoY and 70bps YoY respectively.

Valuation: At CMP, the stock is trading at 26.2X FY19E earnings, company has a strong market share in the HFD segment and it is gaining market share in the packaged food segment (oats) & auxiliary business. Company derives 2/3rd of its revenue from urban market; hence we believe it as a good proxy to play the urban consumption recovery cycle. We are valuing the stock at 30XFY19E to arrive at the target price to INR 5,988 and maintain OUTPERFORMER rating.

Risks: Adverse raw material price movements, heightened competition, slowdown in urban demand recovery & slowdown in discretionary expenditure.

Shares of GLAXOSMITHKLINE CONSUMER HEALTHCARE LTD. was last trading in BSE at Rs.5245 as compared to the previous close of Rs. 5250.8. The total number of shares traded during the day was 517 in over 191 trades.

The stock hit an intraday high of Rs. 5352.7 and intraday low of 5234.7. The net turnover during the day was Rs. 2727170.

Source : Equity Bulls

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