Strong results GSK-CH :: Centrum
Strong results
GSK-CH posted Q3CY12 results ahead of our expectations with topline
growth at 15.2% YoY on the back of 6% growth in domestic volume,
35% in the non-MFD segment, 3% in exports and 8% decline in CSD
sales. Gross margin expanded by 62bps which helped boost operating
profit by 75bps to 19.9%. Higher business auxiliary income too
boosted PAT which was up by 25%YoY. Maintain BUY.
Q3CY13 results ahead of expectations: Net sales for the company was ahead of
expectations with 15.2% revenue growth at Rs8577mn led by 6% growth in
volume and 9% in price. Exports grew marginally by 3%. Operating profit was up
by 19.7% at Rs1706mn on the back of gross margin expansion. Auxiliary income
was up by 24% YoY to Rs280mn. PAT was up by 25% and 10% above our estimates
at Rs1286mn.
MFD portfolio growing strong: Domestic MFD portfolio grew by 6% in volume
on the back of 16% (4.5% vol) in Horlicks and 22% (8.5% vol) in Boost sales. The
company increased prices by 5.5% in mid-June across products which helped in
value growth. CSD segment continues to be under pressure with 8% decline in
revenues which had 1.5% negative volume impact. It continues to invest in North,
West India and rural markets for future growth and the current distribution outlets
stand at 7.5lakhs. Sachet sales grew by 45% and formed 5% of total sales and
drove rural growth. Management believes that the premium segment which
accounts for 10% of the industry is growing at a faster clip and the company will
consider entering this segment at a later stage.
To further strengthen its presence in the specialised oral health care segment, GlaxoSmithKline Consumer Healthcare has launched Parodontax, a toothpaste brand that targets those suffering from bleeding gums. Jayant Singh, Executive Vice-President, Marketing, GSK Consumer Healthcare India, told Business Line that with Parodontax, the company was betting on replicating the success of Sensodyne. This brand is expected to compete head on with Colgate Total Pro Gum Health, launched last month.
How is the total oral care market and specialised segments growing?
The total toothpaste market is estimated at Rs 6,000 crore, growing at 20 per cent. Our philosophy is to have strong science-driven brands. We operate in the specialised market segment. Parodontax is positioned at the premium gum care segment, designed to reduce bleeding gums and help reduce the incidence of tooth loss. The average incidence of bleeding gums globally is 33 per cent. Our estimate is that the incidence of bleeding gums in India is similar, if not higher.
How do you see this product increasing your market share?
We already have a success model with Sensodyne and we plan to use this learning for growing the Parodontax brand Our experience has shown that the sensitive toothpaste segment which was just about 3 per cent of the toothpaste market grew to about 9.5 per cent on the back of growing awareness among consumers (due to increased spends on communication by various players) about sensitive teeth problems. This segment is now growing at 45 per cent.
We plan to replicate this success in the gum care segment too and believe it has a huge potential to grow.
How do you plan to increase penetration of your products, especially in rural markets?
Given the premium nature of our pricing, the demand is skewed towards the metros. But there is growing demand from tier 1 and 2 markets. There are two dimensions of growth across categories. For instance, the gum care segment is a small percentage of the total toothpaste market, while the incidence is 33 per cent and thus offers a huge potential to grow. Also the rural consumers, who were using unbranded products, are moving to urban centres and have started using branded products. Meanwhile, urban consumers, who already use branded products are using general purpose products, but have specialised toothpaste needs. All these are opportunities to grow.
Economy growth projections are subdued. How will that impact the FMCG sector?
The external environment is showing signs of weakness. The latest GDP estimates are at 5 per cent and industrial growth is slowing down. However, it is hard to say how much this will impact the fast-moving consumer goods segment. But, we are confident that we have a strong portfolio and believe that our consumers will make good choices about oral health.
Dear Sir/Madam,
GSK Consumer Healthcare announced its Q1 CY13 results on 02 May 2013. The company’s Net Sales increased by 17% YOY to 975 crore and its EBITDA increased by 11% YOY to INR206 crore. EBITDA Margin of the company decreased from 22.1% to 21.1% YOY. PAT of the company increased by 18% YOY to INR156 crore backed by increase in other income. At the CMP of INR4220, the stock discounts its CY13E of INR118 by 35x . We remain Neutral to the stock.
DESCRIPTION |
Mar-13 |
Dec-12 |
Mar-12 |
QOQ |
YOY |
Net Sales |
975 |
735 |
836 |
33% |
17% |
Total Expenditure |
780 |
658 |
651 |
|
|
PBIDT (Excl OI) |
206 |
76 |
185 |
170% |
11% |
EBITDA (%) |
21.1% |
10.4% |
22.1% |
|
|
Other Income |
32 |
35 |
24 |
|
|
Operating Profit |
238 |
112 |
210 |
|
|
Interest |
0 |
0 |
1 |
|
|
PBDT |
238 |
111 |
208 |
|
|
Depreciation |
11 |
8 |
12 |
|
|
PBT |
228 |
103 |
196 |
|
|
Tax |
71 |
34 |
64 |
|
|
Profit After Tax |
156 |
70 |
132 |
124% |
18% |
PAT(%) |
16.0% |
9.5% |
15.8% |
|
|
Equity Capital |
42.06 |
42.06 |
42.06 |
|
|
Face Value (In Rs) |
10.00 |
10.00 |
10.00 |
|
|
No. of shares |
4.21 |
4.21 |
4.21 |
|
|
|
|
|
|
|
|
EPS |
37.12 |
16.56 |
31.38 |
124% |
18% |
Regards,
Team Microsec Research