Gcpl 1 qfy2015ru_310714
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GCPL reported a 9.4% year-over-year increase in quarterly revenue to Rs. 1,889 crore, though operating profit margin declined 47 basis points to 12.8% due to higher raw material costs. Revenue from the international business grew 17% led by Indonesia, Africa, Europe and Latin America. Reported net profit increased 8.1% to Rs. 143 crore. While domestic sales growth slowed, management expects consolidated revenue and profit to grow at a CAGR of 15.7% and 18% respectively over FY2014-16 on the back of acquisitions and synergies from the GHPL merger.
Gcpl 1 qfy2015ru_310714
- 1. Please refer to important disclosures at the end of this report 1 Quarterly result (Consolidated) Y/E March (` cr) 1QFY15 1QFY14 % yoy 4QFY14 % qoq Revenue 1,889 1,727 9.4 1,932 (2.2) EBITDA 242 229 5.5 342 (29.3) OPM (%) 12.8 13.3 (47) 17.4 (455) PAT 143 133 8.1 236 (39.3) Source: Company, Angel Research For 1QFY2015, Godrej Consumer Products (GCPL) posted a slightly lower performance, both on the top-line and bottom-line front, impacted by slowdown in the domestic market. The numbers were impacted, mainly owing to an under performance of the Soaps segment. However, on the international business front, the company reported a 17% yoy growth which was supported by Indonesia, Latin America and Europe markets. Key highlights of the quarter: For 1QFY2015, GCPLs top-line grew 9.4% yoy to `1,889cr. The companys domestic business posted a revenue growth of 6% yoy. The Soaps segment posted a weak top-line growth of 2% yoy. The Hair Colour segment grew ~14% yoy despite of a high base of the corresponding quarter of the previous year; the growth was predominantly volume driven. Household Insecticides witnessed a lower growth of 9%, being impacted by delayed monsoons. Despite macroeconomic challenges in international geographies, the company reported strong numbers on the top-line front. Indonesia, Africa, Europe and Latin America posted top-line growths of 21%, 12%, 26% and 21%, respectively. For the Indonesian business, the OPM came in at 15%, driven by calibrated price increases, implementation of cost saving projects and due to an improved mix. The companys Africa business posted a margin expansion of 100bp. However, Europe and Latin American businesses were not able to report improvement in margins due to upfront marketing investments. Outlook and valuation: Going ahead we expect GCPLs consolidated top-line and bottom-line to grow at a CAGR of 15.7% and 18.0%, respectively, over FY2014-16E. At the current market price, the stock is trading at 27.2x FY2016E consolidated earnings. We maintain our Accumulate rating on the stock with target price of `933. Key Financials (consolidated) Y/E March (` cr) FY2013 FY2014 FY2015E FY2016E Net Sales 6,416 7,602 8,777 10,168 % chg 31.9 18.5 15.5 15.9 Reported Net Profit 796 760 887 1,058 % chg 9.5 (4.6) 16.8 19.3 EBITDA margin (%) 15.5 15.1 15.4 15.6 EPS (`) 23.4 22.3 26.1 31.1 P/E (x) 36.2 37.9 32.5 27.2 P/BV (x) 8.7 7.6 6.4 5.4 RoE (%) 24.0 20.1 19.7 19.7 RoCE (%) 15.9 17.4 19.2 20.3 EV/Sales (x) 4.7 4.0 3.4 2.9 EV/EBITDA (x) 30.6 26.4 22.1 18.6 Source: Company, Angel Research; Note: CMP as of July 30, 2014 ACCUMULATE CMP `847 Target Price `933 Investment Period 12 Months Stock Info Sector Net Debt (` cr) 1,532 Bloomberg Code GCPL@IN Shareholding Pattern (%) Promoters 63.3 MF / Banks / Indian Fls 1.8 FII / NRIs / OCBs 28.5 Indian Public / Others 6.5 Abs. (%) 3m 1yr 3yr Sensex 16.4 34.8 43.4 GCPL 6.1 2.9 94.3 FMCG Market Cap (` cr) 28,824 Beta 0.5 52 Week High / Low 970 / 672 Avg. Daily Volume 19,564 Face Value (`) 1 BSE Sensex 26,087 Nifty 7,791 Reuters Code GOCP.BO Amarjeet S Maurya 022-39357800 Ext: 6831 Amarjeet.maurya@angelbroking.com Godrej Consumer Products Performance Highlights Result Update 1QFY2015 | FMCG July 31, 2014
- 2. GCPL | 1QFY2015 Result Update July 31, 2014 2 Exhibit 1: Quarterly performance (Consolidated) Y/E March (` cr) 1QFY15 1QFY14 % yoy 4QFY14 % qoq FY2014 FY2013 % chg Net Sales 1,889 1,727 9.4 1,932 (2.2) 7,602 6,416 18.5 Consumption of RM 895 801 11.8 923 (3.1) 3,555 3,022 17.6 (% of Sales) 47.4 46.4 48.0 46.8 47.1 Staff Costs 181 175 3.4 185 (1.9) 742 591 25.7 (% of Sales) 9.6 10.2 9.6 9.8 9.2 Advertising 250 239 4.7 146 71.6 833 668 24.6 (% of Sales) 13.2 13.8 7.6 11.0 10.4 Other Expenses 320 283 13.3 336 (4.7) 1,289 1,120 15.0 (% of Sales) 17.0 16.4 17.5 17.0 17.5 Total Expenditure 1,647 1,498 9.9 1,590 3.6 6,419 5,401 18.8 Operating Profit 242 229 5.5 342 (29.3) 1,184 1,015 16.6 OPM 12.8 13.3 17.4 15.6 15.8 Interest 25 24 5.6 27 (5.6) 107 77 38.6 Depreciation 22 22 0.0 13 72.7 82 77 6.3 Other Income 27 13 107.9 19 41.2 63 68 (7.5) Forex loss/ (gain) 3 15 (77.6) 2 70.0 27 33 (18.3) PBT (excl. Ext Items) 218 181 20.7 319 (31.7) 1,030 896 15.0 Ext Income/(Expense) 16.5 1.6 (3) 1 (129) PBT (incl. Ext Items) 202 179 12.5 323 (37.5) 1,030 1,025 0.5 (% of Sales) 10.7 10.4 16.8 13.5 16.0 Provision for Taxation 44 34 74 210 179 17.4 (% of PBT) 22.0 18.9 23 20 17 PAT (reported) bef MI 157 145 8.2 249 (36.8) 819 845 (3.1) PATM 8.3 8.4 12.9 10.8 13.2 Minority Interest 14 13 13 60 49 Reported PAT 143 133 8.1 236 (39.3) 760 796 (4.6) Equity shares (cr) 34 34 34 34 34 FDEPS (`) 4.2 3.9 8.1 6.9 (39.3) 22.3 23.4 (4.6) Source: Company, Angel Research
- 3. GCPL | 1QFY2015 Result Update July 31, 2014 3 Top-line growth steady at 9% GCPL, in its 1QFY2015 results, reported a top-line growth of 9% yoy to `1,889cr. The companys domestic business posted a lower revenue growth of 6% yoy. However, the international business reported a 17% yoy growth which was supported by Indonesia, Latin America and Europe geographies. Exhibit 2: Top-line performance Source: Company, Angel Research Domestic business slows down The companys domestic business posted a revenue growth of 6% yoy. The Soaps segment posted a weak top-line growth of 2% yoy. During the quarter, GCPL entered the germ protection space with the launch of a new variant of Cinthol - Confidence+. The Hair Colour segment grew ~14% yoy despite of a high base of the corresponding quarter of the previous year; the growth was predominantly volume driven. In this segment, the company launched two new color shades - Cinnamon Red, Honey Brown; these shades have been launched at a 15%+ premium to base shades. Household Insecticides posted a lower growth of 9%, impacted by delayed monsoons. The company continued to drive market share gains aided by the performance of HIT Anti Roach Gel, Good Knight Fast Card, and Good Knight Xpress Liquid Vapouriser, among others. International business grows 17% Despite the macroeconomic challenges in international geographies, GCPLs international business grew by 17%. Indonesia, Africa, Europe and Latin America posted a top-line growth of 21%, 12%, 26% and 21% yoy respectively. 1,389 1,595 1,691 1,716 1,727 1,957 1,979 1,932 1,889 39.2 34.5 25.8 29.7 23.9 22.7 17.0 12.2 9.4 - 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 - 500 1,000 1,500 2,000 2,500 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 (%) (`cr) Top-line (LHS) yoy growth (RHS)
- 4. GCPL | 1QFY2015 Result Update July 31, 2014 4 Exhibit 3: International business Region 1QFY2015 1QFY2014 (yoy %) Net Sales (` cr) LATAM 126 104 21 Indonesia 349 288 21 Afica 250 223 12 Europe 164 130 26 889 104 21 OPM OPM (yoy bp) LATAM 4.0 6.1 (210) Indonesia 15.0 13.8 120 Africa 14.0 13.0 100 Europe 9.0 9.6 (60) Source: Company, Angel Research Bottom-line up 8% yoy The company reported an operating profit of `242cr for 1QFY2015 (up 5.5% yoy) which was driven by a strong growth of 15% in the international business operating profit. During the quarter, the operating margin contracted significantly (by 47bp yoy) on account of higher raw material costs (up 102bp yoy). Exhibit 4: Reported PAT performance Source: Company, Angel Research 130 159 172 205 130 195 195 233 143 30.3 24.8 3.1 22.4 1.7 22.3 13.4 13.4 8.1 - 5.0 10.0 15.0 20.0 25.0 30.0 35.0 10 60 110 160 210 260 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 (%) (`cr) PAT (LHS) yoy growth (RHS)
- 5. GCPL | 1QFY2015 Result Update July 31, 2014 5 Exhibit 5: Gross margin and OPM Source: Company, Angel Research Exhibit 6: Ad spends/sales down yoy Source: Company, Angel Research Investment rationale Acquisitions to drive future growth: GCPLs acquisitions have been in line with its 3X3 strategy and are expected to enable the company to spread its footprint and grow inorganically. GCPLs Indonesian subsidiary Megasari (acquired in April 2010) has been consistently posting a healthy financial performance. The acquisition of Darling Group, the market leader in hair extension products in the African continent, and Chile based Cosmetica Nacional will continue to drive strong growth for the company in Africa and LATAM. The Management has constantly reiterated that all recent international acquisitions have been EPS-accretive. Synergistic benefits due to integration of GHPL business: We believe there are significant synergistic benefits for GCPL in terms of distribution and supply-chain networks accrued on account of integration of Godrej Household Products (GHPL) with itself. Although it has been three years since the merger of both the companies, we believe the synergistic benefits are yet to be fully realized. Moreover, GHPLs strong presence in southern India complements GCPLs strong presence in northern India extremely well, giving GCPL a balanced presence. Outlook and valuation Going ahead we expect GCPLs consolidated top-line and bottom-line to grow at a CAGR of 15.7% and 18.0%, respectively, over FY2014-16E. At the current market price, the stock is trading at 27.2x FY2016E consolidated earnings. We maintain our Accumulate rating on the stock with target price of `933. Company background GCPL is a leading FMCG company in the household and personal care products category, with brands such as Good Knight, Hit, Cinthol, Godrej No.1 and Expert. The company has built a foothold in Africa, Latin America, Indonesia and UK through several acquisitions. Currently, ~45% of the company's revenue comes from its international business. 14.3 15.3 16.6 16.0 13.3 15.1 15.5 17.4 12.8 52.2 51.9 55.5 55.1 53.5 53.7 53.3 52.0 52.6 - 10.0 20.0 30.0 40.0 50.0 60.0 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 (%) OPM Gross Margin 153 155 181 163 239 221 228 146 250 11.0 9.7 10.7 9.5 13.9 11.3 11.5 7.6 13.2 - 2.0 4.0 6.0 8.0 10.0 12.0 14.0 10 60 110 160 210 260 310 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 (%) (`cr) Absolute ASP (LHS) ASP as % of sales (RHS)
- 6. GCPL | 1QFY2015 Result Update July 31, 2014 6 Profit & loss statement (consolidated) Y/E March ((` cr) FY11 FY12 FY13 FY14 FY15E FY16E Total operating income 3,694 4,866 6,416 7,602 8,777 10,168 % chg 80.7 31.7 31.9 18.5 15.5 15.9 Total expenditure 3,036 4,004 5,424 6,452 7,425 8,582 Cost of Materials 1,707 2,316 3,022 3,555 3,967 4,494 Power & Fuel Cost 53 80 103 103 114 122 Other Manufacturing Expenses 86 120 168 196 246 305 SG&A Expenses 774 995 1,405 1,698 2,001 2,339 Personnel 285 401 591 749 922 1,119 Others 130 92 137 151 176 203 EBITDA 658 862 992 1,150 1,352 1,586 % chg 4,992.0 31.0 15.1 15.9 17.5 17.4 (% of Net Sales) 17.8 17.7 15.5 15.1 15.4 15.6 Depreciation & amort 50 64 77 82 105 128 EBIT 608 798 915 1,068 1,247 1,458 % chg 4,114.0 31.2 14.7 16.7 16.7 17.0 (% of Net Sales) 16.5 16.4 14.3 14.1 14.2 14.3 Interest & other Charges 49 73 87 107 107 107 Other Income 52 52 68 63 74 82 (% of PBT) 8.5 6.7 7.6 6.1 6.1 5.7 Share in profit of asso. - - - - - - Recurring PBT 612 777 896 1,024 1,214 1,433 % chg 118.1 27.0 15.3 14.3 18.5 18.1 Prior Period & Extra Exp/(Inc.) (41) (200) (129) (6) - - PBT (reported) 653 977 1,025 1,030 1,214 1,433 Tax 138 226 179 210 267 315 (% of PBT) 21.2 23.1 17.5 20.4 22.0 22.0 PAT (reported) 515 751 845 819 947 1,118 Add: Share of earn. of asso. - - - (0) - - Less: Minority interest (MI) - 25 49 60 60 60 PAT after MI (reported) 515 727 796 760 887 1,058 ADJ. PAT 474 527 667 754 887 1,058 % chg 0.4 11.2 26.7 13.0 17.7 19.3 (% of Net Sales) 12.8 10.8 10.4 9.9 10.1 10.4 Basic EPS (` cr) 15.1 21.3 23.4 22.3 26.1 31.1 Fully Diluted EPS (` cr) 15.1 21.3 23.4 22.3 26.1 31.1 % chg 0.4 41.2 9.5 (4.6) 16.8 19.3
- 7. GCPL | 1QFY2015 Result Update July 31, 2014 7 Balance Sheet (consolidated) Y/E March (` cr) FY11 FY12 FY13 FY14 FY15E FY16E SOURCES OF FUNDS Equity Share Capital 32 34 34 34 34 34 Reserves& Surplus 1,693 2,770 3,279 3,741 4,475 5,339 Shareholders Funds 1,725 2,804 3,313 3,775 4,509 5,373 Minority Interest - 88 210 225 225 225 Total Loans 2,001 1,877 2,456 2,373 2,000 1,800 Deferred Tax Liability 13 18 21 26 26 26 Total Liabilities 3,739 4,787 6,000 6,399 6,760 7,424 APPLICATION OF FUNDS Gross Block 3,455 4,186 5,066 5,804 5,974 6,224 Less: Acc. Depreciation 377 494 570 682 787 915 Net Block 3,078 3,692 4,496 5,121 5,186 5,308 Capital Work-in-Progress 8 38 141 167 167 167 Investments - - 121 136 136 136 Current Assets 1,404 2,268 2,923 2,875 3,463 4,359 Inventories 439 784 1,047 1,082 1,250 1,449 Sundry Debtors 384 473 729 711 818 947 Cash 227 640 748 705 780 947 Loans & Advances 187 123 204 218 351 508 Other 167 249 196 159 263 508 Current liabilities 763 1,229 1,716 1,947 2,238 2,593 Net Current Assets 642 1,039 1,207 928 1,224 1,766 Deferred Tax Asset 11 18 35 46 46 46 Mis. Exp. not written off - - - - - - Total Assets 3,739 4,787 6,000 6,399 6,760 7,424
- 8. GCPL | 1QFY2015 Result Update July 31, 2014 8 Cash flow Statement Y/E March (` cr) FY11 FY12 FY13 FY14 FY15E FY16E Profit before tax 612 777 896 1,024 1,214 1,433 Depreciation 50 64 77 82 105 128 Change in Working Capital (375) 224 (57) 169 (220) (376) Interest / Dividend (Net) 6 26 42 79 107 107 Direct taxes paid (142) (210) (207) (238) (267) (315) Others 56 217 69 13 0 0 Cash Flow from Operations 206 1,099 820 1,129 938 977 (Inc.)/ Dec. in Fixed Assets (2,523) (886) (900) (486) (170) (250) (Inc.)/ Dec. in Investments 4 (30) (35) 8 - - Cash Flow from Investing (2,527) (856) (865) (495) (170) (250) Issue of Equity 523 685 0 0 0 0 Inc./(Dec.) in loans 1,916 (326) 399 (393) (373) (200) Dividend Paid (Incl. Tax) (164) (146) (162) (170) (213) (254) Interest / Dividend (Net) (32) (42) (84) (113) (107) (107) Cash Flow from Financing 2,243 171 153 (677) (693) (561) Inc./(Dec.) in Cash (78) 413 108 (43) 76 166 Opening Cash balances 305 227 640 748 705 780 Closing Cash balances 227 640 748 705 780 947
- 9. GCPL | 1QFY2015 Result Update July 31, 2014 9 Key ratios Y/E March FY11 FY12 FY13 FY14 FY15E FY16E Valuation Ratio (x) P/E (on FDEPS) 56.0 39.7 36.2 37.9 32.5 27.2 P/CEPS 51.0 35.3 31.2 32.0 27.4 23.1 P/BV 16.7 10.3 8.7 7.6 6.4 5.4 Dividend yield (%) 0.5 0.6 0.6 0.6 0.7 0.9 EV/Sales 8.3 6.2 4.7 4.0 3.4 2.9 EV/EBITDA 46.5 34.9 30.6 26.4 22.1 18.6 EV / Total Assets 6.8 5.0 3.9 3.6 3.3 2.9 Per Share Data (`) EPS (Basic) 15.1 21.3 23.4 22.3 26.1 31.1 EPS (fully diluted) 15.1 21.3 23.4 22.3 26.1 31.1 Cash EPS 16.6 24.0 27.1 26.5 30.9 36.6 DPS 4.5 4.8 5.0 5.3 6.3 7.5 Book Value 50.7 82.4 97.3 110.9 132.5 157.8 Returns (%) ROCE (Pre-tax) 16.3 17.0 15.9 17.4 19.2 20.3 Angel ROIC (Pre-tax) 17.4 19.7 18.7 20.1 22.3 23.9 ROE 29.8 25.9 24.0 20.1 19.7 19.7 Turnover ratios (x) Asset Turnover (Gross Block) 1.2 1.3 1.4 1.5 1.7 1.9 Inventory / Sales (days) 43 59 60 52 52 52 Receivables (days) 38 35 41 34 34 34 Payables (days) 33 58 59 59 59 59 WC cycle (ex-cash) (days) 48 36 42 27 27 27
- 10. GCPL | 1QFY2015 Result Update July 31, 2014 10 Research Team Tel: 022 - 39357800 E-mail: research@angelbroking.com Website: www.angelbroking.com DISCLAIMER This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Pvt. Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Pvt. Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Pvt. Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may have investment positions in the stocks recommended in this report. Disclosure of Interest Statement GCPL 1. Analyst ownership of the stock No 2. Angel and its Group companies ownership of the stock No 3. Angel and its Group companies' Directors ownership of the stock No 4. Broking relationship with company covered No Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to -15%) Sell (< -15%) Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors