NOMURA - GSK Consumer

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GSK Consumer reported 2QFY15 results which were below our and street

expectations. While sales were 1.3% below our estimates, PAT was 3.1%

below our and 2.1% below street estimates.


What do the results mean?

Volume growth continues to remain soft and below the long-term average.

We estimate that for the quarter volume growth has continued to remain in

the low single digit range vs. long-term average of ~11%. Margins also

continue to be under pressure both at the gross and EBITDA level which is

another negative to report from the results.

Key numbers

 Net sales increased 10.6% to INR10.75bn against our expectation of

INR10.89bn and street expectations of INR10.98bn.

 EBITDA came in at INR1.96bn vs. our estimate of INR2.16bn and the

street at INR1.97bn.

 Consolidated gross margin declined 155bps to 62.9% vs. our estimate of

50bps y-y improvement.

 EBITDA margin came in at 18.2%, down 155bps y-y. We were expecting

EBITDA margins at 19.8% (flat y-y) and the street was at 17.9%.

 PAT came in at INR1.6bn against our expectation of INR1.65bn and the

street at INR1.64bn. The key saving grace was higher-than-expected non-
operating other income.