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Q3FY12 – Strong growth across businesses. International business margin
boosted overall EBITDA margins
• Consolidated net sales stood at `13.5 bn, up 36% Y-o-Y (including acquisition), due to a
strong growth across geographies and businesses. Consolidated EBIDTA stood at `2.7 bn 59% up
Y-o-Y. EBITDA margins expanded 160bps Y-o-Y to 20.1%. Consolidated PAT grew 40.6% Y-o-Y to
`1.7 bn. PAT margins expanded 42bps Y-o-Y to 12.4%
• Standalone sales grew 20% Y-o-Y to `7.8 bn. EBITDA grew 19.2% Y-o-Y at `1.6 bn while EBITDA
margin was flat on Y-o-Y at 20.5%. Godrej Household Products reported strong sales growth of
30% Y-o-Y. International business reported sales of `5.7 bn, 68% up Y-o-Y, while EBITDA was up
225% Y-o-Y to `1.13 bn.
• The company acquired 60% stake in Chilean Hair care company, Cosmetica Nacional, for an
US$38 mn. The company is market leader in US$110 mn (~`5 bn) hair colour market with 30%
market share in Chile.
• GCPL announced preferential allotment of 16.7 mn shares to Baytree Investments (Temasek
arm) at `410 per share with total size of issue to be `6.8 bn.
Result Highlights
Performance boosted by international business, while domestic business grew by strong 20%
Consolidated net sales at `13.5 bn, up 36% Y-o-Y, due to strong performance by international
business which grew by 68% Y-o-Y. The international business growth was push up by Darling group
acquisition and currency Impact. However business growth was strong across geographies. Further
the Indian subcontinent posted a strong 20% Y-o-Y sales growth led by 31% Y-o-Y growth in soaps
and 30% Y-o-Y growth in household insecticides.
EBITDA margin expansion led by incremental margins in international business
Consolidated EBIDTA stood at `2.7 bn 59% up Y-o-Y. EBITDA margins expanded 160bps Y-o-Y to
20.1% led by strong EBITDA margin expansion in the international business (961bps to 20%). Margin
pressure on the Indian business eased out with Y-o-Y flat margins and 144bps expansion on Q-o-Q
basis to 20.5%. High interest and taxes restricted PAT growth to 40.6% Y-o-Y to `1.7 bn. PAT
margins expanded 42bps Y-o-Y to 12.4%.
Acquisition of Cosmetica Nacional, (Chile) to boost the LATAM hair care business portfolio
GCPL has increased its presence in LATAM by acquiring 60% in Chilean hair care company,
Cosmetica Nacional. With this acquisition, GCPL gets deeper access to LATAM hair care and colour
cosmetics market with strong presence in Chile. Management has indicated acquisition to be EPS
accretive from first year.
Valuation & Viewpoint
The company has maintained strong growth trajectory during the quarter. However we have a
cautious view on the company due to the currency risk, integration risk of recent acquisitions and
slow growth in domestic hair color business.
Domestic business reported sales of `7.8bn and EBITDA margin flat at 20.5%.
• Standalone sales grew 30% Y-o-Y to `7.8 bn. Decrease in ad spends and employee cost set off
the decline in gross margin (67bps Y-o-Y) and increase in other expenditure, resulting in flat
EBITDA margin at 20.5%.
• Toilet soap sales grew 31% Y-o-Y ahead of category growth of 7% Y-o-Y, with volume growth
of 18-19%.
• Hair colour sales grew 9% Y-o-Y mostly led by volumes. Management expects higher growth
in the segment going forward with premiumisation of product mix.
• Godrej Household Products reported strong sales growth of 30% Y-o-Y (category growth ~15%)
mostly volume led.
International business (~42% of consolidated sales): EBITDA margin expansion by 961bps
• International business reported sales of `5.7 bn, up 68% Y-o-Y, while oraganic growth
excluding acquisition was 30% Y-o-Y. It reported EBITDA margin expansion of 961bps to 20%.
• Megasari reported sales of `2.5 bn (35% Y-o-Y growth and local currency growth of 20% Y-o-Y)
and EBITDA margin of 20.6% (190bps Y-o-Y and 120bps Q-o-Q expansion), prior to royalty
payment made to GCPL.
• African business (Rapidol, Kinky, Tura and Darling group) reported sales of `1.86 bn (local
currency organic growth of 14% Y-o-Y) and EBITDA margin of 31%. The incremental margins
were as result of high margin Darling Group acquisition and peak season. The margins are
expected moderate going forward.
• Latin America sales stood at `820m (29% Y-o-Y growth and local currency growth of 20%
Y-o-Y) and EBITDA margin of 9%.
• Keyline (UK) reported sales of `430 mn, 43% Y-o-Y growth (local currency growth of 25%
Y-o-Y) on the back of low base. It posted a 6% EBITDA margin during the quarter.
Acquisition of Cosmetica Nacional,(Chile) to boost the LATAM hair care business portfolio
• GCPL acquired 60% stake in Chilean hair care company, Cosmetica Nacional with total outlay
of US$38 mn (`1,900 mn).
• Cosmetica Nacional is market leader in Chilean and Panama Hair colour industry with 30%
market share in Chile.
• It has annual revenues of US$36 mn and 20% EBITDA margin, and grew by 19% Y-o-Y in CY11.
Hair colour (62%) and colour cosmetics (24%) are major revenues contributors (CY11). The
products are present in all major LATAM countries.
• The management expects the acquisition to be EPS accretive from first year.
• The transaction will be completed by Apr’12 and management plans to acquire 100% stake in
the company over 3-5 years time frame.
• The acquisition gives GCPL deeper access to LATAM market with strong brand portfolio.
Further it will eventually have synergistic benefits with GCPL’s hair colour business in
Argentina.
Equity Dilution with issue of 16.7 mn shares to Baytree Investments
• GCPL announced preferential allotment of 16.7 mn shares to Baytree Investments (Temasek
arm) at `410 per share with total size of issue to be `6.8 bn.
• The deal money is likely to flow in before financial year end.
• With this equity dilution, promoter stake comes down to 64% from current 67.2%.
• The company plans to utilize this money to fund acquisition of Cosmetica Nacional and Phase
II of Darling group acquisition.
Other highlights
• GCPL’s dollar denominated debt stood at US$440 mn while net debt at the end of Q3FY12
was `22 bn.
• The management has indicated the 1:1 as comfortable level of debt equity ratio.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Q3FY12 – Strong growth across businesses. International business margin
boosted overall EBITDA margins
• Consolidated net sales stood at `13.5 bn, up 36% Y-o-Y (including acquisition), due to a
strong growth across geographies and businesses. Consolidated EBIDTA stood at `2.7 bn 59% up
Y-o-Y. EBITDA margins expanded 160bps Y-o-Y to 20.1%. Consolidated PAT grew 40.6% Y-o-Y to
`1.7 bn. PAT margins expanded 42bps Y-o-Y to 12.4%
• Standalone sales grew 20% Y-o-Y to `7.8 bn. EBITDA grew 19.2% Y-o-Y at `1.6 bn while EBITDA
margin was flat on Y-o-Y at 20.5%. Godrej Household Products reported strong sales growth of
30% Y-o-Y. International business reported sales of `5.7 bn, 68% up Y-o-Y, while EBITDA was up
225% Y-o-Y to `1.13 bn.
• The company acquired 60% stake in Chilean Hair care company, Cosmetica Nacional, for an
US$38 mn. The company is market leader in US$110 mn (~`5 bn) hair colour market with 30%
market share in Chile.
• GCPL announced preferential allotment of 16.7 mn shares to Baytree Investments (Temasek
arm) at `410 per share with total size of issue to be `6.8 bn.
Result Highlights
Performance boosted by international business, while domestic business grew by strong 20%
Consolidated net sales at `13.5 bn, up 36% Y-o-Y, due to strong performance by international
business which grew by 68% Y-o-Y. The international business growth was push up by Darling group
acquisition and currency Impact. However business growth was strong across geographies. Further
the Indian subcontinent posted a strong 20% Y-o-Y sales growth led by 31% Y-o-Y growth in soaps
and 30% Y-o-Y growth in household insecticides.
EBITDA margin expansion led by incremental margins in international business
Consolidated EBIDTA stood at `2.7 bn 59% up Y-o-Y. EBITDA margins expanded 160bps Y-o-Y to
20.1% led by strong EBITDA margin expansion in the international business (961bps to 20%). Margin
pressure on the Indian business eased out with Y-o-Y flat margins and 144bps expansion on Q-o-Q
basis to 20.5%. High interest and taxes restricted PAT growth to 40.6% Y-o-Y to `1.7 bn. PAT
margins expanded 42bps Y-o-Y to 12.4%.
Acquisition of Cosmetica Nacional, (Chile) to boost the LATAM hair care business portfolio
GCPL has increased its presence in LATAM by acquiring 60% in Chilean hair care company,
Cosmetica Nacional. With this acquisition, GCPL gets deeper access to LATAM hair care and colour
cosmetics market with strong presence in Chile. Management has indicated acquisition to be EPS
accretive from first year.
Valuation & Viewpoint
The company has maintained strong growth trajectory during the quarter. However we have a
cautious view on the company due to the currency risk, integration risk of recent acquisitions and
slow growth in domestic hair color business.
Domestic business reported sales of `7.8bn and EBITDA margin flat at 20.5%.
• Standalone sales grew 30% Y-o-Y to `7.8 bn. Decrease in ad spends and employee cost set off
the decline in gross margin (67bps Y-o-Y) and increase in other expenditure, resulting in flat
EBITDA margin at 20.5%.
• Toilet soap sales grew 31% Y-o-Y ahead of category growth of 7% Y-o-Y, with volume growth
of 18-19%.
• Hair colour sales grew 9% Y-o-Y mostly led by volumes. Management expects higher growth
in the segment going forward with premiumisation of product mix.
• Godrej Household Products reported strong sales growth of 30% Y-o-Y (category growth ~15%)
mostly volume led.
International business (~42% of consolidated sales): EBITDA margin expansion by 961bps
• International business reported sales of `5.7 bn, up 68% Y-o-Y, while oraganic growth
excluding acquisition was 30% Y-o-Y. It reported EBITDA margin expansion of 961bps to 20%.
• Megasari reported sales of `2.5 bn (35% Y-o-Y growth and local currency growth of 20% Y-o-Y)
and EBITDA margin of 20.6% (190bps Y-o-Y and 120bps Q-o-Q expansion), prior to royalty
payment made to GCPL.
• African business (Rapidol, Kinky, Tura and Darling group) reported sales of `1.86 bn (local
currency organic growth of 14% Y-o-Y) and EBITDA margin of 31%. The incremental margins
were as result of high margin Darling Group acquisition and peak season. The margins are
expected moderate going forward.
• Latin America sales stood at `820m (29% Y-o-Y growth and local currency growth of 20%
Y-o-Y) and EBITDA margin of 9%.
• Keyline (UK) reported sales of `430 mn, 43% Y-o-Y growth (local currency growth of 25%
Y-o-Y) on the back of low base. It posted a 6% EBITDA margin during the quarter.
Acquisition of Cosmetica Nacional,(Chile) to boost the LATAM hair care business portfolio
• GCPL acquired 60% stake in Chilean hair care company, Cosmetica Nacional with total outlay
of US$38 mn (`1,900 mn).
• Cosmetica Nacional is market leader in Chilean and Panama Hair colour industry with 30%
market share in Chile.
• It has annual revenues of US$36 mn and 20% EBITDA margin, and grew by 19% Y-o-Y in CY11.
Hair colour (62%) and colour cosmetics (24%) are major revenues contributors (CY11). The
products are present in all major LATAM countries.
• The management expects the acquisition to be EPS accretive from first year.
• The transaction will be completed by Apr’12 and management plans to acquire 100% stake in
the company over 3-5 years time frame.
• The acquisition gives GCPL deeper access to LATAM market with strong brand portfolio.
Further it will eventually have synergistic benefits with GCPL’s hair colour business in
Argentina.
Equity Dilution with issue of 16.7 mn shares to Baytree Investments
• GCPL announced preferential allotment of 16.7 mn shares to Baytree Investments (Temasek
arm) at `410 per share with total size of issue to be `6.8 bn.
• The deal money is likely to flow in before financial year end.
• With this equity dilution, promoter stake comes down to 64% from current 67.2%.
• The company plans to utilize this money to fund acquisition of Cosmetica Nacional and Phase
II of Darling group acquisition.
Other highlights
• GCPL’s dollar denominated debt stood at US$440 mn while net debt at the end of Q3FY12
was `22 bn.
• The management has indicated the 1:1 as comfortable level of debt equity ratio.
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