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NEUTRAL
CMP Target Price
Investment Period
`872 -
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 29,687 1,378 0.4 977/625 46,870 1 18,598 5,508 GOCP.BO GCPL@IN
Godrej Consumer Products Ltd (GCPL), in its 1QFY2014 results, reported a healthy top-line growth of 23.9% yoy to `1,720cr. However, the OPM disappointed, declining by 149bp yoy, impacted by higher advertisement and promotion (A&P) expenditure and lower margins in international operations. Key highlights of the quarter: GCPLs domestic business grew by 19%. Home care, Soaps and Hair Care segments posted a revenue growth of 24%, 13% and 32% yoy respectively. Despite a 410bp yoy increase in gross margins (aided by fall in palm oil prices), the domestic OPM declined by 55bp yoy due to a 74% yoy increase in advertising expenditure. The companys international business posted a top-line growth of 30% yoy to `830cr. Indonesia, African, Latin American and European businesses posted a top-line growth of 17%, 49%, 21% and 59% respectively. Sales growth was impacted by depreciation of currencies in South Africa, Argentina and Indonesia. The OPM of the international business also fell by 240bp yoy. The OPM of the Indonesian business fell 260bp yoy to 15% due to contract manufacturing done at break-even margins (for one year) for divested business and 58% yoy increase in wages due to the government regulation on minimum wages and 33% increase in fuel costs. The OPM of the African business declined by 570bp yoy mainly due to depreciation of South African Rand. Outlook and valuation: Going ahead we expect GCPLs consolidated top-line and bottom-line to grow at a CAGR of 18.8% and 18.9% over FY2013-15E. At the current market price, the stock is trading at 29.4x FY2015E consolidated earnings. We maintain our Neutral rating on the stock.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 63.3 1.2 28.3 7.2
3m (8.1) (0.9)
V Srinivasan
022-39357800 Ext: 6831 v.srinivasan@angelbroking.com
1QFY14 1,720 801 46.5 179 10.4 239 13.9 281 16.3 1,500 221 12.8 24 22 18 15 177 2 179 10.4 34 18.9 145 8.4 13 133 34 3.9
1QFY13 1,389 664 47.8 129 9.3 153 11.0 244 17.6 1,190 199 14.3 16 20 18 18 163 163 11.7 11 6.9 152 10.9 21 130 34 3.8
% yoy 23.9 20.6 39.0 56.2 15.1 26.0 11.0 46.4 11.3 (2.0) (12.6) 8.5 9.9
4QFY13 1,716 770 44.9 171 10.0 163 9.5 337 19.6 1,440 275 16.0 22 16 28 5 260 129 389 22.7 53 14
% qoq 0.3 4.0 4.6 47.1 (16.7) 4.1 (19.8) 8.4 38.1 (36.7) 218.4 (32.0) (54.0)
FY2013 6,391 2,951 46.2 591 9.2 652 10.2 1,199 18.8 5,392 999 15.6 77 77 84 33 896 (129) 1,025 16.0 179 17
FY2012 4,851 2,316 47.7 401 8.3 450 9.3 823 17.0 3,990 861 17.7 66 64 67 21 777 (200) 977 20.1 226 23 751 15.5 25 726 32 22.4
(4.2)
336 19.6 2
(56.7)
845 13.2 49
1.7 1.7
334 34 9.8
(60.3) (60.3)
796 34 23.4
9.6 4.2
1QFY2014 130 319 214 115 778 3.0 15.0 13.0 9.0
10
(%)
19.7
18.8
14.3
15.3
16.6
16.0
12.8
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
OPM
Gross Margin
Investment rationale
Acquisitions to drive future growth: 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 been consistently posting a 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.
CMP (`) 418 743 1,325 170 872 4,148 599 320 213 5,010 140
TP (`) -
Upside (%) -
P/E (x) FY14E 30.1 34.9 32.2 31.8 34.7 33.9 35.9 28.4 29.3 40.6 18.6 FY15E 26.0 29.2 27.4 27.0 29.4 27.9 32.9 24.0 24.6 33.5 16.5
EV/Sales (x) FY14E 3.1 1.3 4.8 4.1 3.9 4.3 4.4 6.9 2.6 5.1 1.0 FY15E 2.6 1.1 4.2 3.5 3.3 3.6 3.9 5.8 2.2 4.3 0.9
RoE (%) FY14E 35.6 35.7 100.0 39.2 24.8 34.1 113.4 36.1 21.4 56.4 9.3 FY15E 32.7 34.6 91.0 36.7 24.2 33.7 87.0 34.9 21.0 50.3 9.7
CAGR # Sales 15.4 16.1 15.7 16.2 18.8 17.6 12.6 16.2 14.8 14.4 11.0 PAT 17.5 15.3 15.0 19.5 18.9 19.6 11.1 19.2 24.0 14.5 14.4
Source: Company, Angel Research; Note: Denotes CAGR for FY2013-15E;*December year ending
Source: Company, Angel Research, Note: Blue line indicates 5-year average
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.
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) 5.7 47 21 95 9 5.5 44 38 72 42 6.7 59 36 87 30 6.5 59 37 105 15 6.5 59 37 95 14 6.5 59 37 91 17 41.5 166.7 44.5 25.0 121.5 38.4 18.8 113.9 33.2 17.5 135.3 27.6 19.3 148.3 24.8 19.9 133.0 24.2 11.0 10.0 11.8 4.1 31.0 14.9 14.2 16.4 5.0 53.3 16.2 16.2 18.8 4.6 82.7 20.6 20.6 24.3 5.0 97.4 25.1 25.1 29.5 5.0 116.6 29.7 29.7 34.5 5.0 140.5 87.4 74.0 28.2 0.5 14.4 72.2 29.5 61.6 53.1 16.4 0.6 8.6 49.1 8.4 54.0 46.5 10.5 0.5 6.4 35.8 6.5 42.4 35.9 9.0 0.6 4.9 31.1 5.4 34.7 29.6 7.5 0.6 3.9 24.4 4.9 29.4 25.3 6.2 0.6 3.4 21.1 4.4 FY10 FY11 FY12 FY13E FY14E FY15E
10
E-mail: research@angelbroking.com
Website: www.angelbroking.com
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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
GCPL No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
11