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Getting aggressive in innovations
GCPL has become aggressive in innovations across its key markets,
resulting in a strong ~40% yoy growth in revenues during Q1 FY12
at Rs10bn. The higher adspend on account of increase in new
launches will put pressure on operating margin in the near term.
However, the aggressive innovation strategy will help the company
in the long run. The management has charted a rapid growth plan
and targets to achieve revenue CAGR of 26% over the next 10
years. Around 10% growth is envisaged through the inorganic route.
All this translates into increasing revenues 10x by 2021.
Strong growth momentum across segments
Both the domestic and international businesses of GCPL are
witnessing a strong revenue growth momentum. Home insecticides
business recorded a 40% yoy growth (>2x category growth) while
soaps revenues grew by 17% yoy - ahead of the industry growth of
8-9% during Q1 FY12. On the international business front, GCPL’s
older international business surpassed expectations with hair colours
in South Africa recording 19% yoy growth and UK growing by 16%
yoy. GCPL has started launching new products in its recently
acquired businesses which will further drive growth.
Management targets cost synergies of Rs2bn per year by FY15
GCPL is looking at cost synergies of Rs2bn per year by FY15 from the
merger of GCPL and GHPL. The savings are expected to come from
cost reduction following the merger of sales and marketing functions,
benefits of scale in media and raw material buying and operating
leverage from higher turnover generated due to distribution
synergies. Some of the synergies like cost reduction and scale
benefits would fully flow through in FY12.
Earnings to witness 22% CAGR, recommend Buy
GCPL is actively scouting for acquisitions in the domestic and
international market (especially in Africa/ Latin America) provided
there is a strong strategic and operational fit and the transaction is
EVA positive in the first year. GCPL’s successful acquisition
integration in the past makes us confident of the management’s
ability to derive synergy benefits. Acquisition, if any, could be a
major growth driver. At the current market price of Rs427, the stock
is trading 17.9x FY13E EPS of Rs23.9. We recommend Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Getting aggressive in innovations
GCPL has become aggressive in innovations across its key markets,
resulting in a strong ~40% yoy growth in revenues during Q1 FY12
at Rs10bn. The higher adspend on account of increase in new
launches will put pressure on operating margin in the near term.
However, the aggressive innovation strategy will help the company
in the long run. The management has charted a rapid growth plan
and targets to achieve revenue CAGR of 26% over the next 10
years. Around 10% growth is envisaged through the inorganic route.
All this translates into increasing revenues 10x by 2021.
Strong growth momentum across segments
Both the domestic and international businesses of GCPL are
witnessing a strong revenue growth momentum. Home insecticides
business recorded a 40% yoy growth (>2x category growth) while
soaps revenues grew by 17% yoy - ahead of the industry growth of
8-9% during Q1 FY12. On the international business front, GCPL’s
older international business surpassed expectations with hair colours
in South Africa recording 19% yoy growth and UK growing by 16%
yoy. GCPL has started launching new products in its recently
acquired businesses which will further drive growth.
Management targets cost synergies of Rs2bn per year by FY15
GCPL is looking at cost synergies of Rs2bn per year by FY15 from the
merger of GCPL and GHPL. The savings are expected to come from
cost reduction following the merger of sales and marketing functions,
benefits of scale in media and raw material buying and operating
leverage from higher turnover generated due to distribution
synergies. Some of the synergies like cost reduction and scale
benefits would fully flow through in FY12.
Earnings to witness 22% CAGR, recommend Buy
GCPL is actively scouting for acquisitions in the domestic and
international market (especially in Africa/ Latin America) provided
there is a strong strategic and operational fit and the transaction is
EVA positive in the first year. GCPL’s successful acquisition
integration in the past makes us confident of the management’s
ability to derive synergy benefits. Acquisition, if any, could be a
major growth driver. At the current market price of Rs427, the stock
is trading 17.9x FY13E EPS of Rs23.9. We recommend Buy.
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