Result Update 3QFY2013 | FMCG

February 1, 2013

Godrej Consumer Products

Performance Highlights
Quarterly result (Consolidated)
Y/E March (` cr) Revenue EBITDA OPM (%) Recurring PAT 3QFY13 1,691 281 16.6 172 3QFY12 1,344 265 19.7 167 % yoy 25.8 5.8 (315) 3.1 2QFY13 1,595 244 15.3 159 % qoq 6.0 15.0 129 8.1

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 24,212 1,143 0.3 768/421 32,722 1 19,781 5,999 GOCP.BO GCPL@IN

`711 -

Source: Company, Angel Research

Godrej Consumer Products Ltd (GCPL), in its 3QFY2013 results, reported an impressive top-line growth of 25.8% yoy to `1,691cr. The domestic business registered a growth of 20% yoy on account of strong growth across categories. The international business registered a growth of 34%, aided by an impressive performance by the Indonesia business (Megasari), which grew by 30% yoy and consolidation of phase II geographies of Darling group. Key highlights of the quarter: On the domestic front Home care, Soaps and Hair Care segments posted a top-line growth of 28% yoy, 20% yoy and 17% yoy respectively. The company continued to gain market share and enjoy leadership across all formats of electrics, coils and aerosols. It recently launched Goodknight Advanced Colour Play in the electric format. Indonesian and African businesses posted a top-line growth of 30% and 21.5% yoy, respectively. The OPM fell by 315bp yoy to 16.6%, due to the steep 61% yoy increase in advertisement and promotion (A&P) expenses. A&P expenses as a percentage of sales went up by 236bp on a yoy basis. The fall in OPM was also to an extent due to the steep 1,070bp decline in the margins of African business on a high base. The bottomline rose by a marginal 3% yoy to `172cr impacted by OPM compression, lower other income and higher tax rate (up 293bp yoy to 26.2%). Outlook and valuation: At the current market price, the stock is trading at 26.2x FY2014E consolidated earnings. After valuing the companys various international subsidiaries and giving effect to their varied geographic presence, we believe the current implied valuation of the domestic business is at fair levels. We maintain our Neutral rating on the stock.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 63.8 1.2 27.4 7.6

Abs. (%) Sensex GCPL

3m 6.6 (1.1)

1yr 14.3 62.2

3yr 20.9 198.9

Key Financials (consolidated)

Y/E March (` cr) Net Sales % chg Net Profit (Adj.) % chg EBITDA margin (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2011 3,643 78.5 482 41.8 17.6 14.2 50.3 13.3 38.4 25.0 7.1 40.6

FY2012 4,851 33.2 547 13.6 17.7 16.1 44.3 8.6 33.1 18.7 5.2 29.6

FY2013E 6,386 31.6 708 29.5 15.7 20.8 34.2 7.3 23.7 18.6 4.0 25.4

FY2014E 7,743 21.2 923 30.2 17.0 27.1 26.2 6.0 26.3 22.5 3.2 19.1

V Srinivasan
022-39357800 Ext: 6831 v.srinivasan@angelbroking.com

Please refer to important disclosures at the end of this report

GCPL | 3QFY2013 Result Update

Exhibit 1: Quarterly performance (Consolidated)

Y/E March (` 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 Other Income Forex loss/ (gain) PBT (excl. Ext Items) Ext Income/(Expense) PBT (incl. Ext Items) (% of Sales) Provision for Taxation (% of PBT) PAT (reported) bef MI PATM Minority Interest Adjusted PAT Equity shares (cr) FDEPS (`)
Source: Company, Angel Research

3QFY13 1,691 752 44.5 157 9.3 181 10.7 321 19.0 1,411 281 16.6 19 20 19 3 257 257 15.2 67 26.2 190 11.2 18 172 34 5.1

3QFY12 1,344 624 46.5 111 8.2 112 8.3 232 17.2 1,079 265 19.7 29 17 25 244 (5) 239 17.8 55 23.2 183 13.6 16 167 34 4.9

% yoy 25.8 20.4 41.9 61.5 38.5 30.8 5.8 (34.4) 19.9 (24.0) 5.4 7.8

2QFY13 1,595 768 48.1 133 8.4 155 9.7 295 18.5 1,351 244 15.3 20 21 19 8 215 215 13.5 48 22

% qoq 6.0 (2.0) 17.9 16.6 8.6 4.4 15.0 (5.7) (0.9) (2.9) (64.3) 19.6 19.6

9MFY2013 4,675 2,181 46.7 419 9.0 489 10.5 862 18.4 3,952 723 15.5 55 61 56 28 636 636 13.6 126 20

9MFY2012 3,528 1,702 48.2 272 7.7 340 9.6 600 17.0 2,914 614 17.4 47 49 88 21 585 (175) 760 21.5 166 22 769 21.8 20 399 32 12.3

% chg 32.5 28.2 54.3 43.8 43.6 35.6 17.8

24.7 (35.6) 34.7 8.7 (16.4) (24.0) (33.8)

3.7

168 10.5 8

13.3

509 10.9 47

3.1 3.1

159 34 4.7

8.1 8.1

462 34 13.6

15.8 10.1

Exhibit 2: Actual vs Angel estimates

(` cr) Revenue EBITDA OPM (%) Recurring PAT
Source: Company, Angel Research

Actual 1,691 281 16.6 172

Angel est. 1,652 264 16.0 174

% chg 2.4 6.1 59 (0.9)

February 1, 2013

GCPL | 3QFY2013 Result Update

Top-line growth steady at 25.8%

GCPL reported an impressive top-line growth of 25.8% yoy to `1,691cr. The domestic business registered a growth of 20% yoy. Revenue from the international business registered a growth of 34% yoy. Exhibit 3: Robust top-line performance
1,800 1,600 1,400 1,200 (` cr) 1,000 800 600 1,011 989 200 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 998 400 39.6 24.5 1,186 1,344 1,323 1,389 1,595 1,691 91.0 98.6 30.9 35.9 39.2 34.5 25.8 120.0 100.0 80.0 60.0 40.0 20.0 ( %)

Top-line (LHS) Source: Company, Angel Research

yoy growth (RHS)

Home care and Personal wash segments drive domestic growth

The domestic business registered a growth of 20% yoy. The companys homecare (household insecticides) category grew by 28% yoy (1.3x category growth) in 3QFY2013. It continued to gain market share and enjoy leadership across all formats of electrics, coils and aerosols. GCPL recently launched Goodknight Advanced Colour Play in the electric format. The highly penetrated personal wash (soaps) segment grew by 20% yoy, with the underlying volume growth coming at 2%. The Management indicated that the Cinthols relaunch received good response. The haircare business posted growth of 17% aided by positive response for Godrej expert rich crme hair colour.

International business posts strong growth led by Indonesia and Africa

Revenue from the international business registered a growth of 34%, aided by an impressive performance from Indonesia and consolidation of phase II geographies of Darling group from November 2012. On an organic basis, the international business posted a growth of 19%. The Indonesian business grew by 30% yoy (31% yoy in constant currency terms) and sales came in at `324cr. Sales growth in Indonesia was led by continuous marketing investments, new product launches and distribution expansion. The Africa business posted a top-line growth of 23% to `226cr. The LatAm business witnessed a strong sales growth of 91%, with sales at `150cr aided by the consolidation of Chile based Cosmetica Nacional and new product launches. Flagship brand Illicit was relaunched in Chile.

February 1, 2013

GCPL | 3QFY2013 Result Update

Exhibit 4: International business

Region Net Sales LATAM Asia Afica Europe OPM LATAM Asia Africa Europe
Source: Company, Angel Research

3QFY2013 150 324 226 50 750 8.0 20.0 20.0 5.0

3QFY2012 82 249 187 43 561 8.7 20.4 30.7 6.2

(yoy %) 83 30 21 15 33.6 (yoy bp) (70) (40) (1070) (120)

Bottom-line contraction

up

only

marginally

impacted

by

OPM

GCPLs bottom-line rose by a marginal 3% yoy to `172cr impacted by OPM compression, lower other income and higher tax rate (up 293bp yoy to 26.2%). The OPM fell by 315bp yoy to 16.6%, due to a steep 61% yoy increase in advertisement and promotion (A&P) expenses. A&P expenses as a percentage of sales went up by 236bp on a yoy basis. The OPM fell to an extent on account of a steep 1,070bp decline in the margins of African business on a high base. During 3QFY2012 the African business had exceptionally high margins on account of one time low cost inventory and seasonal format mix in the hair extension category. The OPM for the African business at 20% is still higher than the Managements guided OPM range of 17%-19% for it.

Exhibit 5: Recurring PAT up by 3.1% yoy

190 170 150 130 (` cr) 110 90 70 120 142 100 50 30 10 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 41.1 10.8 144 167 168 130 159 172 3.1 39.1 54.4 18.3 30.3 24.8 94.2 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 -

PAT (LHS) Source: Company, Angel Research

yoy growth (RHS)

February 1, 2013

( %)

GCPL | 3QFY2013 Result Update

Exhibit 6: Gross margin and OPM

60.0 50.0 40.0 30.0 20.0 10.0 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 16.7 17.0 14.3 17.4 53.3 51.1 51.0 51.6 53.5 53.6 52.2 51.9 55.5

Exhibit 7: Ad spends/sales rise y-o-y

190 170 150 130 (` cr) 110 90 70 50 111 117 111 112 110 153 155 10 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 75 30 181 7.4 11.2 11.7 9.4 14.0 11.0 9.7 8.3 8.3 10.7 12.0 10.0 8.0 6.0 4.0 2.0 (%)

(%)

19.7

18.8

14.3

15.3

16.6

OPM

Gross Margin

Absolute ASP (LHS)

ASP as % of sales (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

Investment rationale
Acquisitions to drive a 29.9% CAGR in earnings over FY201214E: GCPLs recent acquisitions have been in line with its 3X3 strategy and are expected to enable the company to spread its footprint and grow inorganically. GCPLs Indonesian subsidiary Megasari (acquired in April 2010) has consistently posted healthy financial performance. The acquisition of Darling Group, the market leader in hair extension products in the African continent, and Chile based Cosmetica Nacional will continue to drive strong growth for the company in Africa and LatAm. The integration of Darling group is proceeding smoothly and the second phase of consolidation took place in 3QFY2013. The Management has constantly reiterated that all recent international acquisitions have been EPS-accretive. Over FY201214, we expect GCPL to post a 29.9% CAGR in earnings, aided by consolidation of the recent acquisitions. Synergistic benefits due to integration of GHPL businesses: We believe there are significant synergistic benefits in terms of distribution and supply-chain networks through the integration of Godrej Household Products Ltd (GHPL), which are likely to get reflected in the GCPLs performance going ahead. Moreover, GHPLs strong presence in Southern India complements GCPLs strong presence in Northern India extremely well, giving GCPL a balanced presence.

Outlook and valuation

At the current market price, the stock is trading at 26.2x FY2014E consolidated earnings. After valuing the companys various international subsidiaries and giving effect to their varied geographic presence, we believe the current implied valuation of the domestic business is at fair levels. We maintain our Neutral rating on the stock.

February 1, 2013

GCPL | 3QFY2013 Result Update

Exhibit 8: Peer valuation

Company Asian Paints Britannia Colgate Dabur India Godrej Con GSK Con* HUL ITC Marico Nestle* TGBL Reco. Neutral Buy Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Mcap (` cr)
43,556 5,650 18,299 23,182 24,211 16,078 100,510 241,706 14,149 45,501 9,081
#

CMP (`)
4,541 473 1,346 133 711 3,823 465 309 230 4,719 147

TP (`)
584 -

Upside (%)
23 -

P/E (x) FY13E

37.2 25.8 35.1 29.6 34.2 37.8 30.8 33.0 35.8 41.8 21.3

EV/Sales (x) FY13E

3.8 0.9 5.7 3.8 4.0 4.8 3.8 8.0 3.0 5.3 1.2

RoE (%) FY13E

37.7 39.1 104.6 43.4 23.7 36.3 84.5 35.1 25.4 71.2 8.9

CAGR # Sales
17.6 15.3 15.4 16.6 26.3 16.1 15.5 17.4 18.6 16.0 9.7

FY14E
30.9 19.2 29.9 24.3 26.2 32.3 27.4 27.9 28.3 33.1 18.0

FY14E
3.1 0.7 4.9 3.2 3.2 4.0 3.2 6.8 2.5 4.4 1.1

FY14E
35.7 42.7 97.0 44.0 26.3 31.9 75.8 35.1 22.6 60.3 9.8

PAT
19.4 25.6 17.1 21.6 29.9 18.3 19.3 18.7 28.1 16.1 19.1

Source: Company, Angel Research; Note: Denotes CAGR for FY2012-14E;*December year ending

Exhibit 9: One-year forward P/E chart

50.0 45.0 40.0 35.0 30.0 (x) 25.0 20.0 15.0 10.0 5.0 May-09 May-10 May-11 May-12 Jan-09 Mar-09 Jan-10 Mar-10 Jan-11 Mar-11 Mar-12 Jul-09 Jul-10 Jul-11 Nov-09 Nov-10 Nov-11 Jul-12 Nov-12 Jan-12 Sep-09 Sep-10 Sep-11 Sep-12 Jan-13

Source: Company, Angel Research, Note: Blue line indicates 5-year average

February 1, 2013

GCPL | 3QFY2013 Result Update

Company background
GCPL is a leading FMCG company in the household and personal care products category, with brands such as Good Knight, HIT, Cinthol, Godrej No.1 and Expert. The company has built a foothold in Africa, Latin America, Indonesia and UK through several acquisitions. Currently, ~40% of the company's revenue comes from its international business.

Profit & loss statement (consolidated)

Y/E March (` cr) Total operating income % chg Total expenditure Cost of Materials Advertising Exp Personnel Others EBITDA % chg (% of Net Sales) Depreciation & amort EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Share in profit of asso. Recurring PBT % chg Prior Period & Extra Exp/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earn. of asso. Less: Minority interest (MI) PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY09 1,397 26.5 1,186 770 97 87 233 207 (3.4) 14.9 19 188 (4.3) 13.5 19 37 17.4 209 11.6 (1) 210 37 17.5 173 173 173 8.4 12.4 6.7 5.1 8.4 FY10 2,044 46.3 1,634 946 133 152 403 407 96.6 20.0 24 384 104.2 18.8 11 45 10.7 420 100.7 420 80 19.1 340 340 340 96.7 16.6 11.0 10.0 96.7 FY11 3,646 78.4 3,002 1,749 352 285 617 641 57.3 17.6 50 591 54.0 16.2 52 70 11.4 612 45.7 (33) 645 130 21.3 515 515 482 41.8 13.2 14.9 14.2 41.8 FY12 4,866 33.5 3,990 2,319 450 392 830 861 34.3 17.7 64 796 34.8 16.4 66 52 6.5 798 30.4 (180) 977 226 28.3 751 24.5 727 547 13.6 11.3 16.1 16.1 13.6 FY13E 6,401 31.5 5,383 2,966 766 543 1,108 1,003 16.5 15.7 81 922 15.7 14.4 54 79 8.2 962 20.6 25 937 212 22.0 725 42.0 683 708 29.5 11.1 20.8 20.8 29.5 FY14E 7,758 21.2 6,430 3,655 774 658 1,343 1,312 30.9 17.0 98 1,214 31.7 15.7 47 79 6.3 1,261 31.1 1,261 296 23.5 965 42.0 923 923 30.2 11.9 27.1 27.1 30.2

February 1, 2013

GCPL | 3QFY2013 Result Update

Balance Sheet (consolidated)

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Long term Provisions Other long term liabilities Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Long term loans and adv. Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 733 378 127 228 330 403 853 910 305 225 380 553 357 998 285 110 175 3 265 8 359 153 206 1 368 67 660 377 282 8 2,795 167 1,237 227 187 823 736 501 3,754 728 494 234 38 3,458 246 2,041 640 145 1,256 1,208 834 4,809 982 575 407 49 3,608 246 2,271 444 158 1,669 1,446 825 5,135 1,191 673 518 60 3,758 246 2,768 587 158 2,023 1,649 1,119 5,701 853 998 26 546 572 278 4 31 924 955 37 7 32 1,693 1,725 2,001 1 18 9 3,754 34 2,781 2,815 88.00 1,877 (1) 22 7 4,809 34 3,266 3,300 130.00 1,677 (1) 22 7 5,135 34 3,989 4,023 172.00 1,477 (1) 22 7 5,701 FY09 FY10 FY11 FY12 FY13E FY14E

February 1, 2013

GCPL | 3QFY2013 Result Update

Cash flow Statement

Y/E March (` 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 FY09 209 19 (45) (17) 37 (0) 130 (161) (8) (169) 396 90 120 (8) 375 336 43 352 FY10 420 24 (13) (16) 80 (24) 310 34 (67) (33) 5 (241) 104 (16) (324) (47) 352 305 FY11 612 50 (389) 25 130 173 342 (2,736) 67 (2,669) 498 1,973 197 25 2,249 (78) 305 227 FY12 798 64 (11) (18) 226 200 806 (760) (760) 657 (126) 182 (18) 367 413 227 640 FY13 962 81 (173) (12) 212 (39) 607 (416) (416) (200) 199 (12) (387) (196) 640 444 FY14E 1,261 98 (156) (19) 296 4 892 (369) (369) (200) 199 (19) (380) 143 444 587

February 1, 2013

GCPL | 3QFY2013 Result Update

Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) 4.9 44 16 77 6 5.7 47 21 95 9 5.5 44 39 72 42 6.7 59 36 87 30 6.5 59 37 80 34 6.5 59 37 75 35 30.8 109.0 46.6 41.5 166.7 44.5 25.0 121.5 38.4 18.7 113.5 33.1 18.6 105.3 23.7 22.5 101.4 26.3 6.7 5.1 7.5 4.0 22.2 11.0 10.0 11.8 4.1 31.0 14.9 14.2 16.4 5.0 53.3 16.1 16.1 18.7 4.6 82.7 20.8 20.8 24.4 5.0 97.0 27.1 27.1 31.2 5.0 118.2 140.3 95.3 32.0 0.6 17.3 116.4 28.3 71.3 60.4 23.0 0.6 11.7 58.8 24.0 50.3 43.3 13.3 0.7 7.1 40.6 7.0 44.3 38.1 8.6 0.6 5.2 29.6 5.3 34.2 29.1 7.3 0.7 4.0 25.4 5.0 26.2 22.8 6.0 0.7 3.2 19.1 4.4 FY09 FY10 FY11 FY12 FY13E FY14E

February 1, 2013

10

GCPL | 3QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

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

GCPL No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

February 1, 2013

11