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Announces subsidiary merger; no significant earnings impact
Household Products (GHPL, erstwhile Godrej Sara Lee) as well as the South
African businesses of Kinky and Rapidol with itself. Although the merger is a
move towards integration of GCPL’s businesses, we believe it will not have any
significant impact on earnings as these businesses are already 100% owned by
the company. GCPL is currently trading at 26.2x and 22.5x FY11E and FY12E
earnings respectively. We maintain our HOLD rating on the stock with a price
target of Rs 420.
Receives board approval for GHPL merger: GCPL has received approval from its
board of directors for the merger of GHPL with itself. Earlier this year in May,
GCPL had acquired the balance 51% stake in its joint venture with Sara Lee Corp
and subsequently rechristened it as Godrej Household Products.
Also receives approval for merger of South African businesses: GCPL has also
received board approval for the merger of its South African business of Kinky and
Rapidol. Rapidol markets hair colorants in South Africa and its neighbouring
countries while Kinky markets a variety of hair products such as wigs and hair
braids as well as hair accessories across South Africa.
Maintain HOLD with target of Rs 420: We do not see any significant impact on
GCPL’s earnings from the merger of GHPL, Rapidol and Kinky as the company
already holds 100% stake in each of these subsidiaries. We, therefore, maintain
our HOLD rating on the stock with a price target of Rs 420. GCPL is currently
trading at 26.2x and 22.5x FY11E and FY12E earnings respectively.
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