Godrej Consumer Products Ltd.|Q2FY15 Result Update | In-line with expectations:: IndiaNivesh

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Godrej Consumer Products Ltd (GCPL) reported Q2FY15 results that were in-line
with street expectations. The company reported net sales growth of 4.6% yoy to
reach Rs 20475 mn in Q2FY15 against Rs 19574 mn in Q2FY14 (Bloomberg est: Rs
21283 mn). This was largely driven by domestic business which grew by 6.6% yoy,
while international business grew by 2.6% yoy. EBITDA grew 11.3% yoy to reach Rs
3289 mn in Q2FY15 from Rs 2954 mn in Q2FY14. EBITDA margin improved 97 bps
yoy led by domestic business. Lower advertisement and other expenses enabled
expansion in EBITDA margin. PAT grew 20.3% yoy to reach Rs 2346 mn in Q2FY15
from Rs 1950 mn in Q2FY14. PAT margin expanded 71 bps yoy to reach 11.5% in
Q2FY15 from 10% in Q2FY14. This was aided by higher other operating income and
other income, lower depreciation cost and lower finance cost, which was partially
offset by higher tax rate. PAT, adjusted for foreign exchange gain, grew by 22.7%
yoy to reach Rs 2314 mn.
For H1FY15, net sales grew 7% yoy to reach Rs 39338 mn from Rs 36777 mn in
H1FY14. EBITDA grew 8.2% yoy to reach Rs 5684 mn in H1FY15 from Rs 5251 mn in
H1FY14. EBITDA margin expanded 140 bps to reach 13.4% in H1FY15 from 12% in
H1FY14. PAT stood at Rs 3780 mn in H1FY15 against Rs 3277 mn in H1FY14, signifying
growth of 15.4%. PAT margin expanded 70 bps yoy to reach 9.6% in H1FY15 from
8.9% in same period previous year. Adjusted PAT, adjusted for foreign exchange
changes, grew 21.4% yoy to reach Rs 3714 mn.

Indian subcontinent, contributing 52% to consolidated sales, grew by 6.6% yoy to
reach Rs 10912 mn Q2FY15. This was largely driven by hair colour segment and
new launches. Indian subcontinent EBITDA, contributing 61% to consolidated
EBITDA, grew 11.9% yoy to reach Rs 2170 mn. EBITDA margin expanded 94 bps yoy
at 19.9% in Q2FY15 against 18.9% in Q2FY14, led by better cost management.
Q2FY15 performance was impacted by unfavourable category mix. PAT grew by
21.7% yoy to reach Rs 1740 mn in Q2Y15 against Rs 1430 mn in Q2FY14. PAT margin
expanded 198 bps to 15.9% in Q2FY15 from 14% in Q2FY14. This is on account of
higher other income and lower than proportionate growth in depreciation and
interest cost.
In household insecticides, sales grew by meagre 2% yoy in Q2FY15; though better
than category growth. Category growth rates were impacted due to delay in
monsoon. Excluding Central-Northern India, which had a rainfall deficit of 24%,
growth was 7% for rest of the country


Hair Colours segment continued to grow at healthy pace with growth rate of 9%
driven by volume growth. Godrej Expert Rich Crème Hair Color continued to grow
its market share and has become the highest selling crème colour by units within
20 months of launch. The company is indulging in large scale wholesale activation
program and is intensifying rural reach to sustain category outperformance. It
forayed into premium hair care category by launching bblunt products.
Soaps category continued to de-grow this quarter. However, GCPL value growth
stood at 13%. The company entered in germ protection space of the soaps category
with launch of Cinthol ‘Confidence+’, which received good response. Lower palm
oil prices are likely to benefit the company in H2FY15. However, the management
stated that they would be cautious as decline in palm oil prices may bring
unorganised players resulting in higher competition.
GCPL forayed into face wash category in Q2FY15 with Godrej No.1 brand. Face wash
is a Rs 15 bn category growing at 30% yoy. The category penetration levels are very
low with urban penetration levels at ~18%.
Its new portfolio of Protekt hand washes, sanitizers and anti mosquito spray is
receiving good response in modern trade. Aer air freshener growth momentum
accelerated pace post the launch of gel format.



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