GSK Consumer posted a 17.8% yoy growth in net sales to `709cr in 4QCY2012, led by an 8% volume growth despite lower offtake from CSD. While gross margins improved 161bp yoy, OPM declined 305bp to 7.2% due to a 37.1% rise in other expenses. Net profit grew 17.9% to `70cr, aided by a 46.6% rise in other income and lower tax rate. The company is expected to maintain double-digit growth in its anchor MFD brands along with new product launches. However, the stock is trading at a one-year forward P/E of 31.2x CY2013 EPS
GSK Consumer posted a 17.8% yoy growth in net sales to `709cr in 4QCY2012, led by an 8% volume growth despite lower offtake from CSD. While gross margins improved 161bp yoy, OPM declined 305bp to 7.2% due to a 37.1% rise in other expenses. Net profit grew 17.9% to `70cr, aided by a 46.6% rise in other income and lower tax rate. The company is expected to maintain double-digit growth in its anchor MFD brands along with new product launches. However, the stock is trading at a one-year forward P/E of 31.2x CY2013 EPS
GSK Consumer posted a 17.8% yoy growth in net sales to `709cr in 4QCY2012, led by an 8% volume growth despite lower offtake from CSD. While gross margins improved 161bp yoy, OPM declined 305bp to 7.2% due to a 37.1% rise in other expenses. Net profit grew 17.9% to `70cr, aided by a 46.6% rise in other income and lower tax rate. The company is expected to maintain double-digit growth in its anchor MFD brands along with new product launches. However, the stock is trading at a one-year forward P/E of 31.2x CY2013 EPS
GSK Consumer posted a 17.8% yoy growth in net sales to `709cr in 4QCY2012, led by an 8% volume growth despite lower offtake from CSD. While gross margins improved 161bp yoy, OPM declined 305bp to 7.2% due to a 37.1% rise in other expenses. Net profit grew 17.9% to `70cr, aided by a 46.6% rise in other income and lower tax rate. The company is expected to maintain double-digit growth in its anchor MFD brands along with new product launches. However, the stock is trading at a one-year forward P/E of 31.2x CY2013 EPS
NEUTRAL CMP Target Price Investment Period Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code FMCG 16,107 (1,515) 0.3 3900/2179 7,352 10 19,643 5,943 GLSM.BO SKB@IN
`3,831 -
Source: Company, Angel Research
For 4QCY2012 GlaxoSmithkline Consumer Healthcare (GSK Consumer) posted a 17.9% yoy growth in net profit to `70cr, aided by a 161bp yoy improvement in gross margin and a 46.6% yoy increase in auxiliary income. Key highlights of the quarter: For 4QCY2012 GSK Consumer posted a 17.8% yoy growth in net sales, aided by an 8% volume growth. The top-line growth was reasonably strong despite lower offtake by the canteen stores department (CSD). The companys sales volume has been impacted by low CSD offtake since the beginning of CY2012. Better pricing resulted in a 161bp yoy increase in gross margin, despite the increase in cost of raw materials such as wheat, sugar etc. However, OPM was down by 305bp yoy to 7.2%, due to the steep 37.1% yoy increase in other expenses to `206cr. On a positive note, the company posted a 46.6% yoy increase in auxiliary income to `25cr. The effective tax rate too was down by 658bp yoy resulting in a 17.9% yoy increase in net profit to `70cr. Outlook and valuation: We expect the companys malted food drinks (MFD) division to continue to post double digit growth, aided by the companys efforts to strengthen its distribution network. The stock has run up steeply post the open offer announcement by the promoters. At the current market price, the stock is trading at 31.2x CY2013E EPS of `123. We continue to remain Neutral on the stock.
Please refer to important disclosures at the end of this report
GSK Consumer | 4QCY2012 Result Update
Exhibit 1: Quarterly Performance
Y/E Dec (` cr) Net Sales Consumption of RM (% of Sales) Staff Costs (% of Sales) Advertising (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM Interest Depreciation & Ammortisation Other Income PBT (excl. Extraordinary Items) Extraordinary Income/(Expense) PBT (incl. Extraordinary Items) (% of Sales) Provision for Taxation (% of PBT) Reported PAT PATM Equity shares (cr) EPS (`) Source: Company, Angel Research
(` cr) Revenue EBITDA OPM (%) PAT Source: Company, Angel Research
Actual 709 51 7.2 70
Angel Est 714 76 10.7 76
% chg (0.7) (33.3) (351) (9.0)
Healthy top-line growth despite de-growth in the CSD segment: GSK Consumer posted a healthy top-line growth of 17.8% yoy to `709cr (`602cr in 4QCY2011), led by an ~8% volume growth. The healthy performance was despite a de-growth in sales to the CSD segment.
Volume Growth(LHS) Source: Company, Angel Research
Value Growth (RHS)
OPM down 305bp yoy to 7.2%: Better pricing resulted in a 161bp yoy improvement in gross margins, despite the increase in cost of raw materials such as wheat, sugar etc. However, the OPM was down by 305bp yoy to 7.2%, due to the steep 37.1% yoy increase in other expenses to `206cr. Earnings growth aided by higher other income: On a positive note, the company posted a 46.6% yoy increase in auxiliary income to `25cr. The effective tax rate too was down by 658bp yoy resulting in a 17.9% yoy increase in net profit to `70cr.
Investment rationale Anchor brands to perform well coupled with new launches: We expect GSK Consumer to perform well with its anchor brands - Horlicks and Boost. Also, with the launch of innovative and premium products, the company is likely to maintain its margins and market share. In the MFD category, we expect Horlicks and Boost to maintain their double digit growth. Though the company has pricing power, innovative launches such as small pack sizes will help the company garner a market share in rural markets and penetrate new areas.
Outlook and valuation
We expect the companys MFD division to continue to post double digit growth, aided by the companys effort to strengthen its distribution network. The stock has run up steeply post the open offer announcement by the promoters. At the current market price, the stock is trading at 31.2x CY2013E EPS of `123. We continue to remain Neutral on the stock.
Source: Company, Angel Research; Note: #Denotes CAGR for FY2012-14E;*December year ending
Company Background GSK Consumer is one of the largest players in the health foods industry in India and a clear market leader in the hot malted beverages category. The company's flagship product - Horlicks is a highly popular brand with a rich heritage, ranking no. 1 in the malted beverages category with a ~50% market share. The company also sells other malted beverages brands, such as Boost, Maltova and Viva. The company is also present in the biscuits segment through its Horlicks biscuits range. In addition, the company promotes and distributes a number of OTC products from its global parent, which include prominent household names like Eno, Crocin and Iodex. GSK Consumer has a strong marketing and distribution network in India, comprising of over 1,800 wholesalers and 400,000 retail outlets.
Y/E Dec (Rs cr) SOURCES OF FUNDS Equity Share Capital Reserves& Surplus Shareholders Funds Total Loans Deferred Tax Liability Long term Provisions Other long term liablities Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Long term loans and advances Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets Source: Company, Angel Research
Y/E Dec (` cr) Profit before tax Depreciation Change in Working Capital Interest/ Dividend(Net) Direct taxes paid Others Cash Flow from Operations Inc./ (Dec.) in Fixed Assets Inc./ (Dec.) in Investments Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Interest / Dividend (Net) Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
GSK Consumer No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
