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Revenues bang in line; PAT well above estimate
Godrej Consumer’s (GCPL) Q4FY11 consolidated revenues jumped 96.3% Y-o-Y to ~INR
10 bn. EBITDA increased 65.3% Y-o-Y to INR 1.78 bn, while margins declined 333bps.
COGS inflation (up 154bps), staff cost (up 79bps), higher other expenses (up 35bps) and
advertising and sales promotion (A&P) costs (up 66bps) contributed to margin
contraction. Reported PAT increased 54.4%, to INR 1.42 bn (against our estimate of INR
1.2 bn). PAT growth was hampered by increase in tax rate by 456bps Y-o-Y. This
quarter’s numbers are; however, not exactly comparable with previous ones as there
have been many international acquisitions since then.
Excellent HI and hair color drives growth in domestic business
GCPL continues to enjoy leadership in high margin household insecticides (~37% market
share; 17% Y-o-Y growth in Q4FY11) and hair colours (~29.4% market share; 18% Y-o-
Y growth in Q4FY11) categories in India; and reduced dependence on low margin toilet
soaps (~9.7% market share; 13% Y-o-Y growth in Q4FY11).
International businesses deliver better performance
Despite tough economic environment, international businesses (~35% of consolidated
revenues) reported sales of INR 3.47 bn, up 326% Y-o-Y in Q4FY11. Megasari continued
its strong performance with topline of 1.95 bn and margin (before technical and business
support fee to GCPL) of 20%. MENA and LatAm reported strong numbers.
Outlook and valuations: Attractive; maintain ‘BUY’
Looking at past successes of GCPL’s acquisition integration, we are confident of the
management’s capabilities to derive synergy benefits, going forward, despite likelihood of
near-term pressure on soap volumes. Also, due to reduced dependence on soap the
company is less likely to be impacted by palm oil inflation. The company’s growth
prospects are bright owing to strong growth in hair colour and HI. We maintain ‘BUY’ on
the stock and rate it ‘Sector Performer’ on a relative return basis.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Revenues bang in line; PAT well above estimate
Godrej Consumer’s (GCPL) Q4FY11 consolidated revenues jumped 96.3% Y-o-Y to ~INR
10 bn. EBITDA increased 65.3% Y-o-Y to INR 1.78 bn, while margins declined 333bps.
COGS inflation (up 154bps), staff cost (up 79bps), higher other expenses (up 35bps) and
advertising and sales promotion (A&P) costs (up 66bps) contributed to margin
contraction. Reported PAT increased 54.4%, to INR 1.42 bn (against our estimate of INR
1.2 bn). PAT growth was hampered by increase in tax rate by 456bps Y-o-Y. This
quarter’s numbers are; however, not exactly comparable with previous ones as there
have been many international acquisitions since then.
Excellent HI and hair color drives growth in domestic business
GCPL continues to enjoy leadership in high margin household insecticides (~37% market
share; 17% Y-o-Y growth in Q4FY11) and hair colours (~29.4% market share; 18% Y-o-
Y growth in Q4FY11) categories in India; and reduced dependence on low margin toilet
soaps (~9.7% market share; 13% Y-o-Y growth in Q4FY11).
International businesses deliver better performance
Despite tough economic environment, international businesses (~35% of consolidated
revenues) reported sales of INR 3.47 bn, up 326% Y-o-Y in Q4FY11. Megasari continued
its strong performance with topline of 1.95 bn and margin (before technical and business
support fee to GCPL) of 20%. MENA and LatAm reported strong numbers.
Outlook and valuations: Attractive; maintain ‘BUY’
Looking at past successes of GCPL’s acquisition integration, we are confident of the
management’s capabilities to derive synergy benefits, going forward, despite likelihood of
near-term pressure on soap volumes. Also, due to reduced dependence on soap the
company is less likely to be impacted by palm oil inflation. The company’s growth
prospects are bright owing to strong growth in hair colour and HI. We maintain ‘BUY’ on
the stock and rate it ‘Sector Performer’ on a relative return basis.
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