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Conference call update
Godrej Consumer’s 1Q pre-ex earnings grew by a moderate 8% YoY to
Rs992m, lower than our estimates due to higher costs (input, A&P). A
strong topline growth, particularly strong volumes in domestic business
was key positive. The management indicated that GCPL would focus on
topline and may sacrifice margins in coming quarters which could keep
A&P at high levels. We maintain our earnings estimates as well as Opf
rating; raising target price to Rs475/sh as we roll-over target to Mar-13.
1QFY12 consol. results below our and street estimates
GCPL’s 1Q pre-ex earnings grew ~8% YoY to Rs992m which was much below
our and street estimates. This is despite a 40% rise in net revenues, though
we note that YoY numbers are not comparable due to series of acquisitions.
While other income more than doubled, depreciation and interest rose 60-
80%. Tax rate too rose 190bps YoY to 24.6%. Net earnings benefitted from
compensation for sale of ‘Kiwi’ manufacturing/distribution rights and came in
at Rs2.4bn (+94% YoY).
Strong revenue growth in most segments had been a positive…
Domestic revenue growth had been strong during 1Q driven by high focus on
innovations and A&P as evident from – a) soaps: 17% revenue growth (9%
volume); b) hair colour: 19% (10%); c) home care: 40%. Like-to-like growth
rates in international businesses too had been strong in most cases: a)
Indonesia (54% of international revenues): 19% YoY revenue growth; b)
Africa (12%): 30% YoY; c) LaAm (16%): 22% YoY; UK (17%): 16% YoY.
… while costs in general had been higher impacting margins
Domestic business Ebitda margins at 14.9% were lower than our estimates
due to higher input costs (+150bps YoY; mix impact) as well as higher A&P
(120bps). The management indicated that the step up in A&P was not due to
competitive pressures but to support innovation pipeline and the company
expects to continue the trend even in the coming quarters. A&P spends at
consol. level were also high mainly to support new innovations in Indonesia.
Maintain earning estimates; raise target px to Rs475/sh
The management also indicated that the company would focus on topline
growth cf. margins and hence, A&P in general would stay high on a YoY basis.
Darling acquisition could add Rs200m as per management guidance to FY12
net profits (~3.5%), not built in our numbers as yet and we do not see risk to
our current estimates despite lower than 1Q. Maintain Opf, revise target price
to Rs475/sh (23x FY13CL earnings).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Conference call update
Godrej Consumer’s 1Q pre-ex earnings grew by a moderate 8% YoY to
Rs992m, lower than our estimates due to higher costs (input, A&P). A
strong topline growth, particularly strong volumes in domestic business
was key positive. The management indicated that GCPL would focus on
topline and may sacrifice margins in coming quarters which could keep
A&P at high levels. We maintain our earnings estimates as well as Opf
rating; raising target price to Rs475/sh as we roll-over target to Mar-13.
1QFY12 consol. results below our and street estimates
GCPL’s 1Q pre-ex earnings grew ~8% YoY to Rs992m which was much below
our and street estimates. This is despite a 40% rise in net revenues, though
we note that YoY numbers are not comparable due to series of acquisitions.
While other income more than doubled, depreciation and interest rose 60-
80%. Tax rate too rose 190bps YoY to 24.6%. Net earnings benefitted from
compensation for sale of ‘Kiwi’ manufacturing/distribution rights and came in
at Rs2.4bn (+94% YoY).
Strong revenue growth in most segments had been a positive…
Domestic revenue growth had been strong during 1Q driven by high focus on
innovations and A&P as evident from – a) soaps: 17% revenue growth (9%
volume); b) hair colour: 19% (10%); c) home care: 40%. Like-to-like growth
rates in international businesses too had been strong in most cases: a)
Indonesia (54% of international revenues): 19% YoY revenue growth; b)
Africa (12%): 30% YoY; c) LaAm (16%): 22% YoY; UK (17%): 16% YoY.
… while costs in general had been higher impacting margins
Domestic business Ebitda margins at 14.9% were lower than our estimates
due to higher input costs (+150bps YoY; mix impact) as well as higher A&P
(120bps). The management indicated that the step up in A&P was not due to
competitive pressures but to support innovation pipeline and the company
expects to continue the trend even in the coming quarters. A&P spends at
consol. level were also high mainly to support new innovations in Indonesia.
Maintain earning estimates; raise target px to Rs475/sh
The management also indicated that the company would focus on topline
growth cf. margins and hence, A&P in general would stay high on a YoY basis.
Darling acquisition could add Rs200m as per management guidance to FY12
net profits (~3.5%), not built in our numbers as yet and we do not see risk to
our current estimates despite lower than 1Q. Maintain Opf, revise target price
to Rs475/sh (23x FY13CL earnings).
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