Buy GSK Consumer - CY10 concall - Motilal Oswal

GSK CONSUMER: CY10 concall; MFD margins to expand; New products share to be 3x by CY13; upgrading est 3-4%; Buy

GSK Consumer reported strong volume growth of ~13% in MFD segment in CY10.

Horlicks volumes grew 13% while Boost reported strong growth of 18%. Market share of Horlicks stood at 53% for the period ending Nov-10.

GSK plans to increase its distribution from current 0.66m outlets to 0.7m by the end of CY11 and further to 0.8m in CY12.

Management seemed confident of sustaining 9-10% volume growth for the next 10 years (volume growth in the past 2-3 years has been around 12%).

Biscuits segment grew 21% during the year (~70% in 4QCY10) led by launches in value added categories like Creams and Cookies.

We believe it is too early to term new products as a success story and note that current profit margins factor in advertising spend distribution costs and losses on new launches. We are upgrading our estimates by 3-4% for CY11-12 to factor in the cost control and higher financial other income. The stock trades at 24x CY11E and 20x CY12E. Maintain Buy with a target price of Rs2,410 (23x CY12E EPS).

Source : Equity Bulls

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