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Godrej Consumer Products Ltd (GCPL) is a major player in the Indian FMCG market with a strong presence in
the personal care, hair care and home care segments in India. The recent acquisitions (in line with the 3x3
strategy) have immensely improved the long-term growth prospects of the company.
On the back of strong distribution and advertising & promotional support, we expect GCPL to sustain the
market share in its core categories of soap and hair colour in the domestic market. On the other hand,
continuing its strong growth momentum the household insecticide business is expected to grow by 19% YoY.
In the international markets, the Indonesian and Argentine businesses are expected to achieve a CAGR of
around 25% and 15% respectively over FY2011-13. This along with the recently acquired Darling group would
lead GCPL to post a top line CAGR growth of ~25% over FY2011-13.
Due to the recent domestic and international acquisitions, the company’s business has transformed from a
commodities soap business into the business of value-added personal care and home care products. Hence,
we expect its OPM to be in the range of 16-18% in the coming years. Overall, we expect GCPL’s bottom line to
grow at a CAGR of about 23% over FY2011-13.
We believe increased competitive activity in the personal care and hair care segments and the impact of high
food inflation on the demand for its products are the key risks to the company’s profitability.
At the current market price the stock trades at 24.4x its FY2012E EPS of Rs17.4 and at 18.9x its FY2013E EPS of
Rs22.4. We have a Buy recommendation on the stock.
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