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Godrej Consumer Products Limited
Quick Comment - 3QF11: Concerns to the Fore
Stock likely to correct on the back of this result:
GCPL reported consolidated Q3F11 results with
revenue, operating profit and adjusted PAT growth of
89% 72% & 43% respectively, which compares with our
estimates of 93% 74% & 48%, respectively. Key
highlights of the quarter are 1) Tepid organic revenue
growth - international business revenue grew by 5%
YoY and domestic (ex-GHPL) revenue grew by 8%
2) Severe pressure on profitability of domestic
business - gross margins declined by 450bps YoY and
3) Anecdotal evidence of continuing high competitive
intensity – consolidated ad spends to sales at 10.8% for
the consolidated business are the highest since F2004.
Key negatives: (1) Soap inventory pipeline correction
seems to have continued in the quarter under review
with soap revenue growth of 6%. This performance
should be viewed in context of increased promotions
and ad-spend during the quarter. (2) Volume growth in
the hair color business was flat, in our view (3) Soap
market share declined by 40bps sequentially
(4) Excluding technical fees from group companies,
domestic EBITDA margins declined by 150 bps
(5) Operating margins for Megasari declined by 190 bps
sequentially (6) Disappointing operating performance of
UK & African businesses
Key positives: (1) Megasari reported revenue of
Rs18.5bn for the quarter versus our expectation of
Rs16.5bn (2) GHPL reported growth of 24% for the
quarter driven by 310bps increase in market share and
continuing favorable weather conditions (3) Staff cost
declined by 310 bps (EVA linked compensation policy)
which helped cushion the margin decline
We remain EW: We believe investors will get a better
entry opportunity as the domestic business remains
under pressure and GCPL consolidates its acquisitions.
GCPL has outperformed the market by 8% over the past
3 months driven by value accretive acquisitions and, in
our view, the current stock price already factors in an
acceleration in earnings from these factors.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Godrej Consumer Products Limited
Quick Comment - 3QF11: Concerns to the Fore
Stock likely to correct on the back of this result:
GCPL reported consolidated Q3F11 results with
revenue, operating profit and adjusted PAT growth of
89% 72% & 43% respectively, which compares with our
estimates of 93% 74% & 48%, respectively. Key
highlights of the quarter are 1) Tepid organic revenue
growth - international business revenue grew by 5%
YoY and domestic (ex-GHPL) revenue grew by 8%
2) Severe pressure on profitability of domestic
business - gross margins declined by 450bps YoY and
3) Anecdotal evidence of continuing high competitive
intensity – consolidated ad spends to sales at 10.8% for
the consolidated business are the highest since F2004.
Key negatives: (1) Soap inventory pipeline correction
seems to have continued in the quarter under review
with soap revenue growth of 6%. This performance
should be viewed in context of increased promotions
and ad-spend during the quarter. (2) Volume growth in
the hair color business was flat, in our view (3) Soap
market share declined by 40bps sequentially
(4) Excluding technical fees from group companies,
domestic EBITDA margins declined by 150 bps
(5) Operating margins for Megasari declined by 190 bps
sequentially (6) Disappointing operating performance of
UK & African businesses
Rs18.5bn for the quarter versus our expectation of
Rs16.5bn (2) GHPL reported growth of 24% for the
quarter driven by 310bps increase in market share and
continuing favorable weather conditions (3) Staff cost
declined by 310 bps (EVA linked compensation policy)
which helped cushion the margin decline
We remain EW: We believe investors will get a better
entry opportunity as the domestic business remains
under pressure and GCPL consolidates its acquisitions.
GCPL has outperformed the market by 8% over the past
3 months driven by value accretive acquisitions and, in
our view, the current stock price already factors in an
acceleration in earnings from these factors.
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