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Godrej Consumer Products (GCPL IN, INR 403, BUY)
Godrej Consumer’s (GCPL) net sales surged 35.9% YoY to INR 13.4bn (ahead of our estimates). Key
positives were robust 20% YoY growth in domestic business and 30% in international businesses.
EBITDA strengthens to 19.7%, an increase of 298 bps on YoY basis due to favorable category sales
mix, integration led cost savings initiatives, efficient commodities sourcing and competitive and
efficient advertising spends. PAT at INR 1671mn witnessed a 40.7% Y‐o‐Y growth (well ahead of our
estimate of INR 1304mn). Key negatives were mere 9% sales growth in domestic hair care business.
Maintain ‘BUY’.
Domestic business: Household Insecticide and soaps shine
Domestic business grew at a healthy rate of 20% Y‐o‐Y to INR 7790mn with EBITDA margin at 20.41%
(down 48bps Y‐o‐Y). Household insecticides (HI), and personal wash posted a handsome growth of
30% and 31% Y‐o‐Y respectively outperforming the category growth. However, hair care disappointed
with meager 9% sales growth.
Acquisitions, synergies reflect in international sales
International sales grew 68% YoY (organic growth at 30% YoY) backed by a strong growth of 35% YoY
in Indonesia and 251% YoY in Africa (primarily due to DGH merger). Revival is witnessed in LatAm
business with 29% sales growth and 9% EBITDA margin (160bps sequential expansion). Megasari
margin expanded further to 20.6% (Q1FY12: 14.4%; Q2FY12: 19.4%). International business witnessed
margins expansion of 954bps Y‐o‐Y to 19.9% aiding consolidated margins. GCPL has entered into an
agreement to acquire 60% stake in Cosmetica Nacional (sales: USD36mn), a market leading hair
colorant and cosmetics company in Chile. We believe Chile provides a good opportunity and fits 3x3
strategy however we will keep a close track on the valuation .
Our view and valuation; Bright outlook, maintain ‘BUY’
We believe that GCPL’s focus on innovation and brand equity will go a long way as it acquisitions
stabilize and synergies surface. We will come out with a detailed note post conference call at 12 noon
on 23rd January 2012.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Godrej Consumer Products (GCPL IN, INR 403, BUY)
Godrej Consumer’s (GCPL) net sales surged 35.9% YoY to INR 13.4bn (ahead of our estimates). Key
positives were robust 20% YoY growth in domestic business and 30% in international businesses.
EBITDA strengthens to 19.7%, an increase of 298 bps on YoY basis due to favorable category sales
mix, integration led cost savings initiatives, efficient commodities sourcing and competitive and
efficient advertising spends. PAT at INR 1671mn witnessed a 40.7% Y‐o‐Y growth (well ahead of our
estimate of INR 1304mn). Key negatives were mere 9% sales growth in domestic hair care business.
Maintain ‘BUY’.
Domestic business: Household Insecticide and soaps shine
Domestic business grew at a healthy rate of 20% Y‐o‐Y to INR 7790mn with EBITDA margin at 20.41%
(down 48bps Y‐o‐Y). Household insecticides (HI), and personal wash posted a handsome growth of
30% and 31% Y‐o‐Y respectively outperforming the category growth. However, hair care disappointed
with meager 9% sales growth.
Acquisitions, synergies reflect in international sales
International sales grew 68% YoY (organic growth at 30% YoY) backed by a strong growth of 35% YoY
in Indonesia and 251% YoY in Africa (primarily due to DGH merger). Revival is witnessed in LatAm
business with 29% sales growth and 9% EBITDA margin (160bps sequential expansion). Megasari
margin expanded further to 20.6% (Q1FY12: 14.4%; Q2FY12: 19.4%). International business witnessed
margins expansion of 954bps Y‐o‐Y to 19.9% aiding consolidated margins. GCPL has entered into an
agreement to acquire 60% stake in Cosmetica Nacional (sales: USD36mn), a market leading hair
colorant and cosmetics company in Chile. We believe Chile provides a good opportunity and fits 3x3
strategy however we will keep a close track on the valuation .
Our view and valuation; Bright outlook, maintain ‘BUY’
We believe that GCPL’s focus on innovation and brand equity will go a long way as it acquisitions
stabilize and synergies surface. We will come out with a detailed note post conference call at 12 noon
on 23rd January 2012.
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