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3QFY15 ahead of expectations. Upgrade to ADD. We upgrade GSK-CH to ADD from REDUCE noting inexpensive relative valuations post a long phase of underperforming the sector. The company reported a healthy quarter beating our revenue and EBITDA estimates by 5% each. We estimate 17% EPS CAGR over FY2015-17E despite pressure from excise increase. We expect volume growth acceleration and RM tailwinds to drive this growth. Our revised target price of `6,100 (from `5,800) implies a PER of 32X December 2016E EPS
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3QFY15 – topline surprise driven by both volumes and pricing GSK-CH reported revenues of `10.13 bn for 3QFY15, up 17% yoy and 5% ahead of our expectations. Revenues, excluding business auxiliary income, grew a healthy 16% yoy – a combination of 5% overall volume growth (modest acceleration from the past two quarters) and 11% pricing contribution (higher than the normal 6-8%). The company indicated that a part (around 1.5% of the total 11%) of the pricing improvement came from the first-in-manyyears increase in the price of its low-unit-price pack to `6 from `5. We believe this may have been necessitated by the likely steep excise increase that company is looking at next fiscal. EBITDA for the quarter was `1.06 bn, up 20% yoy and 5% ahead of our expectation. EBITDA beat was driven solely by topline beat; EBITDA margin of 10.5% for the quarter (up 28 bps yoy) was in line with our expectations. Lower-than-expected other income meant that reported PAT of `964 mn (+21% yoy) was in line with our expectations. HFD portfolio gains 120 bps market share in the trailing 12 months On the operational front, the company indicated – (1) double-digit topline growth across regions and Horlicks extensions, (2) 120 bps market share gain for the HFD portfolio on a TTM basis; base Horlicks (50 bps) and Women’s Horlicks (30 bps) contributed a good portion of the gains, (3) 25% value growth for the oats portfolio, (4) GM tailwinds from correction in SMP and milk prices; we note that gross margins expanded 176 bps yoy and 357 bps qoq, and (5) 15% decline in export revenues and 20% growth in domestic revenues; we believe domestic volume growth was perhaps closer to 8% suggesting decent acceleration from recent growth trends. Relatively inexpensive with strong growth ahead, in our view; upgrade to ADD Despite pressure from sharp excise increases, we expect GSK-CH to deliver EPS CAGR of 17% over FY2015-17E. The stock has underperformed the broader sector meaningfully over the past 12-18 months and now trades at multiples close to the sector average (ex-ITC). We believe GSK-CH should trade at a premium to the sector given its strong franchise, solid growth potential and superior RoIC. We upgrade the stock to ADD from REDUCE with a revised target price of `6,100 (from `5,800).
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily04022015rq.pdf
3QFY15 ahead of expectations. Upgrade to ADD. We upgrade GSK-CH to ADD from REDUCE noting inexpensive relative valuations post a long phase of underperforming the sector. The company reported a healthy quarter beating our revenue and EBITDA estimates by 5% each. We estimate 17% EPS CAGR over FY2015-17E despite pressure from excise increase. We expect volume growth acceleration and RM tailwinds to drive this growth. Our revised target price of `6,100 (from `5,800) implies a PER of 32X December 2016E EPS
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
3QFY15 – topline surprise driven by both volumes and pricing GSK-CH reported revenues of `10.13 bn for 3QFY15, up 17% yoy and 5% ahead of our expectations. Revenues, excluding business auxiliary income, grew a healthy 16% yoy – a combination of 5% overall volume growth (modest acceleration from the past two quarters) and 11% pricing contribution (higher than the normal 6-8%). The company indicated that a part (around 1.5% of the total 11%) of the pricing improvement came from the first-in-manyyears increase in the price of its low-unit-price pack to `6 from `5. We believe this may have been necessitated by the likely steep excise increase that company is looking at next fiscal. EBITDA for the quarter was `1.06 bn, up 20% yoy and 5% ahead of our expectation. EBITDA beat was driven solely by topline beat; EBITDA margin of 10.5% for the quarter (up 28 bps yoy) was in line with our expectations. Lower-than-expected other income meant that reported PAT of `964 mn (+21% yoy) was in line with our expectations. HFD portfolio gains 120 bps market share in the trailing 12 months On the operational front, the company indicated – (1) double-digit topline growth across regions and Horlicks extensions, (2) 120 bps market share gain for the HFD portfolio on a TTM basis; base Horlicks (50 bps) and Women’s Horlicks (30 bps) contributed a good portion of the gains, (3) 25% value growth for the oats portfolio, (4) GM tailwinds from correction in SMP and milk prices; we note that gross margins expanded 176 bps yoy and 357 bps qoq, and (5) 15% decline in export revenues and 20% growth in domestic revenues; we believe domestic volume growth was perhaps closer to 8% suggesting decent acceleration from recent growth trends. Relatively inexpensive with strong growth ahead, in our view; upgrade to ADD Despite pressure from sharp excise increases, we expect GSK-CH to deliver EPS CAGR of 17% over FY2015-17E. The stock has underperformed the broader sector meaningfully over the past 12-18 months and now trades at multiples close to the sector average (ex-ITC). We believe GSK-CH should trade at a premium to the sector given its strong franchise, solid growth potential and superior RoIC. We upgrade the stock to ADD from REDUCE with a revised target price of `6,100 (from `5,800).
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily04022015rq.pdf
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