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Please refer to important disclosures at the end of this report 1
Quarterly Result
(` cr) 2QCY13 2QCY12 % yoy 1QCY13 % qoq
Revenue 853 730 16.9 940 (9.3)
EBITDA 119 111 7.2 171 (30.5)
OPM (%) 13.9 15.2 (126)bp 18.2 (426)bp
PAT 120 107 12.5 156 (23.3)
Source: Company, Angel Research
For 2QCY2013 GlaxoSmithkline Consumer Healthcare (GSK Consumer) posted a
12.5% yoy growth in net profit to ` 120cr, aided by a reasonably healthy
performance on the operating front.
Key highlights of the quarter: For 2QCY2013 GSK Consumer’s top-line rose by
16.9% yoy to ` 853cr aided by a strong ~10% pricing growth and a decent 7%
volume growth. However, the OPM fell by 126bp yoy to 13.9% due to increase in
employee costs, advertising and other expenses. Higher employee costs were due
to certain one-off items arising out of change in actuarial assumptions related to
wage settlement. Other expenses too were higher on a yoy basis due to pre-
operative expenses related to new production units. Other income rose by 32.7%
yoy to `
76cr. The bottom-line rose by 12.5% yoy to `
120cr.
Outlook and valuation: We expect GSK Consumer’s malted food drinks (MFD)
division to continue to post double digit growth, aided by its efforts to strengthen
distribution network. The company’s top-line and bottom-line are expected to
grow at a CAGR of 17.6% and 19.6% respectively over CY2012-14E. At the
current market price, the stock is trading at 28.4x CY2014E EPS of ` 149. We
continue to remain Neutral on the stock.
Key Financials
Y/E Dec. (` cr) CY2011 CY2012 CY2013E CY2014E
Net Sales 2,686 3,079 3,617 4,259% chg 16.5 14.7 17.5 17.7
Net Profit 362 437 514 625
% chg 20.8 20.7 17.7 21.6
EBITDA (%) 15.8 15.1 16.1 16.4
EPS (`) 86.0 103.9 122.2 148.7
P/E (x) 49.0 40.6 34.5 28.4
P/BV (x) 15.5 13.0 10.7 8.6
RoE (%) 33.8 34.9 34.1 33.7
RoCE (%) 37.0 35.4 36.5 35.5
EV/Sales (x) 6.2 5.3 4.4 3.7
EV/EBITDA (x) 39.2 35.0 27.7 22.4
Source: Company, Angel Research; Note: CMP as of August 14, 2013
NEUTRALCMP ` 4,217
Target Price -
Investment Period -
Stock Info
Sector
Net Debt ( ` cr) (1,430)
Bloomberg Code SKB@IN
Shareholding Pattern (%)
Promoters 72.5
MF / Banks / Indian Fls 0.5
FII / NRIs / OCBs 12.0
Indian Public / Others 15.0
Abs. (%) 3m 1yr 3yr
Sensex (1.8) 9.2 6.6
SKB (0.4) 51.5 133.8
FMCG
Market Cap ( ` cr) 17,735
Beta 0.4
52 Week High / Low 6020/2770
Avg. Daily Volume 4,060
Face Value ( ` ) 10
BSE Sensex 19,368
Nifty 5,742
Reuters Code GLSM.BO
V Srinivasan
022-39357800 Ext: 6831
GSK Consumer
Performance Highlights
2QCY2013 Result Update | FMCG
August 16, 2013
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GSK Consumer | 2QCY2013 Result Update
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Exhibit 1: Quarterly Performance
Y/E Dec (` cr) 2QCY13 2QCY12 % yoy 1QCY13 % qoq 1HCY2013 1HCY2012 % chg
Net Sales 853 730 16.9 940 (9.3) 1,793 1,543 16.2
Consumption of RM 299 270 10.5 356 (16.1) 655 601 9.0(% of Sales) 35.0 37.0 37.9 36.5 38.9
Staff Costs 104 79 32.0 89 17.4 193 145 33.2
(% of Sales) 12.2 10.8 9.5 10.8 9.4
Advertising 138 116 18.5 159 (13.6) 297 225 31.8
(% of Sales) 16.1 15.9 16.9 16.6 14.6
Other Expenses 194 154 26.1 165 17.4 359 299 19.8
(% of Sales) 22.7 21.0 17.5 20.0 19.4
Total Expenditure 734 619 18.6 769 (4.5) 1,503 1,270 18.3
Operating Profit 119 111 7.2 171 (30.5) 289 272 6.3
OPM 13.9 15.2 18.2 16.1 17.7
Interest 0.2 0.8 (80.7) 0.1 14.3 0.3 2.0 (85.1)
Depreciation & Ammortisation 12 9 42.7 11 14.0 23 20 11.9
Other Income 76 57 32.7 68 11.7 144 105 36.9
PBT (excl. Extraordinary Items) 182 159 14.9 228 (20.0) 410 355 15.5
Extraordinary Income/(Expense) - - - - -
PBT (incl. Extraordinary Items) 182 159 14.9 228 (20.0) 410 355 15.5
(% of Sales) 21.4 21.7 24.2 22.9 23.0
Provision for Taxation 62 52 19.9 71 (12.9) 134 116 14.9
(% of PBT) 34.2 32.8 31.4 32.6 32.8
Reported PAT 120 107 12.5 156 (23.3) 276 239 15.8
PATM 14.1 14.6 16.6 15.4 15.5
Equity shares (cr) 4.2 4.2 4.2 4.2 4.2
EPS (`) 28.5 25.3 12.5 37.2 (23.4) 66 57 15.8
Source: Company, Angel Research
Exhibit 2: Actual vs Angel estimates
(` cr) Actual Angel Est % chg
Revenue 853 857 (0.5)
EBITDA 119 154 (23.1)
OPM (%) 13.9 18.0 (409)
PAT 120 135 (10.9)
Source: Company, Angel Research
Healthy top-line growth of 16.9% yoy
GSK Consumer posted a healthy top-line growth of 16.9% yoy to ` 853cr ( ` 730cr
in 2QCY2012), led by a strong ~10% pricing growth and a decent 7% volume
growth. Horlicks posted a growth of 19% yoy with volume and value growth of
~9% and ~10% respectively. Boost posted a growth of 15% yoy with volume and
value growth of ~5% and ~10% respectively. The Packaged foods division grew
by 19% yoy.
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GSK Consumer | 2QCY2013 Result Update
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Exhibit 3: Top-line growth at 16.9% yoy
Source: Company, Angel Research
Exhibit 4: Operational performance
Source: Company, Angel Research
OPM down 126bp yoy to 13.9%
Gross margin rose by 203bp yoy to 65% due to better realization. OPM fell by
126bp yoy to 13.9% due to increase in employee costs, advertising and otherexpenses. Higher employee costs were due to certain one-off items arising out of
change in actuarial assumptions related to wage settlement. Other expenses too
were higher on a yoy basis due to pre-operative expenses related to new
production units. Other income rose by 32.7% yoy to ` 76cr. The bottom-line rose
by 12.5% yoy to ` 120cr.
6 5 3
7 2 0
6 0 2
8 1 3
7 3 0
8 2 8
7 0 9
9 4 0
8 5 3
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5.0
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2 Q 1 1
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1 Q 1 2
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( y o y % )
( `
c r )
Top-line (LHS) yoy growth (RHS)
1 6
1 0
1 1
7 7 6 8 8 7
5.0
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( y o y % )
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Volume Growth(LHS) Value Growth (RHS)
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GSK Consumer | 2QCY2013 Result Update
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Exhibit 5: Gross margin and OPM
Source: Company, Angel Research
Exhibit 6: PAT grows by 12.5% yoy
Source: Company, Angel Research
Investment rationale
Anchor brands to perform well coupled with new launches: We expect
GSK Consumer to perform well with its anchor brands - Horlicks and Boost.
Also, with the launch of innovative and premium products, the company is
likely to maintain its margin and market share. In the malted food drinks
(MFD) category, we expect Horlicks and Boost to maintain their double digit
growth. Though the company has pricing power, innovative launches such as
small pack sizes will help the company garner a market share in rural markets
and penetrate new areas.
Outlook and valuation
We expect GSK Consumer’s MFD division to continue to post double digit growth,
aided by its efforts to strengthen distribution network. The company’s top-line and
bottom-line are expected to grow at a CAGR of 17.6% and 19.6% respectively
over CY2012-14E. At the current market price, the stock is trading at 28.4x
CY2014E EPS of ` 149. We continue to remain Neutral on the stock.
Exhibit 7: One-year forward P/E chart
Source: Company, Angel Research, Note: Blue line indicates 5-year average
15.1 16.4
10.2
19.915.2 17.0
7.2
18.213.9
59.462.1 64.0
59.463.0 62.5 66.1 62.1 65
-
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20.0
30.0
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2 Q 1 1
3 Q 1 1
4 Q 1 1
1 Q 1 2
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( % )
OPM Gross margin
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PAT (LHS) yoy growth (RHS)
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GSK Consumer | 2QCY2013 Result Update
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Exhibit 8: Peer valuation
Company Reco. Mcap CMP TP Upside P/E (x) EV/Sales (x) RoE (%) CAGR #
(` cr) (`) (`) (%) FY14E FY15E FY14E FY15E FY14E FY15E Sales PAT
Asian Paints Neutral41,658 434 - - 31.3 27.1 3.2 2.7 35.6 32.7 15.4 17.5
Britannia Neutral 8,989 752 - - 35.4 29.5 1.3 1.1 35.7 34.6 16.1 15.3
Colgate Neutral 18,396 1,353 - - 32.8 28.0 5.0 4.3 100.0 91.0 15.7 15.0
Dabur India Neutral 29,848 172 - - 32.1 27.3 4.2 3.6 39.2 36.7 16.2 19.5
Godrej Con Neutral 30,350 892 - - 35.5 30.0 4.0 3.4 24.8 24.2 18.8 18.9
GSK Con* Neutral 17,735 4,217 - - 34.5 28.4 4.4 3.7 34.1 33.7 17.6 19.6
HUL Neutral 133,156 616 - - 36.9 33.9 4.5 4.0 113.4 87.0 12.6 11.1
ITC Neutral 264,355 335 - - 29.7 25.1 7.3 6.1 36.1 34.9 16.2 19.2
Marico Neutral 13,762 213 - - 29.4 24.6 2.6 2.2 21.4 21.0 14.8 24.0
Nestle* Neutral 49,346 5,118 - - 41.5 34.2 5.2 4.4 56.4 50.3 14.4 14.5
TGBL Neutral 9,112 147 - - 19.5 17.7 1.1 1.0 9.3 9.5 11.0 13.2
Source: Company, Angel Research; Note: #Denotes CAGR for FY2013-15E;*December year ending
Company Background
GSK Consumer is one of the largest players in the health foods industry in India
and a clear market leader in the hot malted beverages category. The company's
flagship product - Horlicks is a highly popular brand with a rich heritage, ranking
no. 1 in the malted beverages category with an ~50% market share. The company
also sells other malted beverage brands, such as Boost, Maltova and Viva. The
company is also present in the biscuits segment through its Horlicks biscuits range.
In addition, the company promotes and distributes a number of OTC products
from its global parent, which include prominent household names like Eno, Crocin
and Iodex. GSK Consumer has a strong marketing and distribution network in
India, comprising of over 1,800 wholesalers and 400,000 retail outlets.
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GSK Consumer | 2QCY2013 Result Update
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Profit & Loss Statement
Y/E Dec (` cr) CY09 CY10 CY11 CY12 CY13E CY14E
Total operating income 1,922 2,306 2,686 3,084 3,617 4,259
% chg 24.6 20.0 16.5 14.8 17.3 17.7
Total Expenditure 1,611 1,818 2,261 2,614 3,036 3,559
Cost of Materials 714 865 1,023 1,152 1,356 1,555
Advertising Exp 302 371 437 493 588 696
Personnel 201 230 258 301 351 426
Others 394 352 542 668 742 882
EBITDA 311 489 425 470 581 700
% chg 30.8 57.3 (13.0) 51.3 23.7 20.5
(% of Net Sales) 16.2 21.2 15.8 15.2 16.1 16.4
Depreciation & Amortisation 42 40 46 36 46 52
EBIT 269 449 379 434 535 649
% chg 37.3 67.1 (15.6) 14.5 41.3 21.2
(% of Net Sales) 14.0 19.5 14.1 14.1 14.8 15.2
Interest & other Charges 4 3 3 2 4 4
Other Income 89 - 165 222 247 302
(% of PBT) 25.2 0.0 30.5 34.0 31.8 31.9
Share in profit of Associates - - - - 2.00 3.00
Recurring PBT 354 446 540 653 779 947
% chg 23.9 26.1 21.1 20.9 19.2 21.6
Prior Period & Extra. Exp./(Inc.) (2.61) (0.29) 6.65 - - -
PBT (reported) 356 447 534 653 779 947
Tax 124 152 178 212 265 322(% of PBT) 35.0 34.1 33.0 32.4 34.0 34.0
PAT (reported) 233 294 355 441 514 625
Add: Share of earnings of asso. - - - - - -
Less: Minority interest (MI) - - - - - -
PAT after MI (reported) 233 294 355 441 514 625
ADJ. PAT 230 294 362 441 514 625
% chg 21.2 27.7 23.1 22.0 42.0 21.6
(% of Net Sales) 12.0 12.7 13.5 14.3 14.2 14.7
Basic EPS (`) 54.7 71.2 86.0 103.9 122.2 148.7
Fully Diluted EPS (̀ ) 54.7 71.2 86.0 103.9 122.2 148.7
% chg 21.2 30.2 20.8 20.7 17.7 72.8
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GSK Consumer | 2QCY2013 Result Update
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Balance Sheet
Y/E Dec (` cr) CY09 CY10 CY11 CY12 CY13E CY14E
SOURCES OF FUNDS
Equity Share Capital 42 42 42 42 42 42Reserves& Surplus 863 918 1,102 1,319 1,610 2,013
Shareholders Funds 905 960 1,144 1,361 1,652 2,056
Total Loans - - - - - -
Deferred Tax Liability (11) (27) (40) (62) (40) (40)
Long term Provisions 51 77 77 77
Other long term liablities 10 11 11 11
Total Liabilities 894 933 1,165 1,388 1,700 2,104
APPLICATION OF FUNDS
Gross Block 492 533 570 590 790 890
Less: Acc. Depreciation 364 397 370 396 442 493
Net Block 128 136 201 194 348 396
Capital Work-in-Progress 38 108 149 197 97 97
Goodwill 66 66 0 0 0 0
Investments - - - - - -
Long term loans and adv. 50 45 45 45
Current Assets 1,173 1,423 1,642 2,057 2,350 2,810
Cash 820 976 1,080 1,464 1,676 2,029
Loans & Advances 56 84 93 111 102 108
Other 297 363 469 482 571 673
Current liabilities 511 800 878 1,105 1,139 1,244
Net Current Assets 662 623 765 952 1,210 1,566
Mis. Exp. not written off - - - - - -
Total Assets 894 933 1,165 1,388 1,700 2,104
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GSK Consumer | 2QCY2013 Result Update
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Cash Flow Statement
Y/E Dec (` cr) CY09 CY10 CY11 CY12 CY13E CY14E
Profit before tax 354 452 540 649 779 947
Depreciation 42 40 46 36 46 52Change in Working Capital 211 169 (200) 187 (26) (2)
Interest/ Dividend(Net) (20) (41) (67) (70) (70) (94)
Direct taxes paid 124 152 178 212 265 322
Others (5) 4 135 13 0 0
Cash Flow from Operations 458 472 276 603 464 581
Inc./ (Dec.) in Fixed Assets 41 111 79 68 100 100
Inc./ (Dec.) in Investments - - - - - -
Cash Flow from Investing (41) (111) (79) (68) (100) (100)
Issue of Equity - (0.00) - - - -
Inc./(Dec.) in loans - - 10 2 - -
Dividend Paid (Incl. Tax) 89 245 171 222 221 221
Interest / Dividend (Net) (20) (41) (67) (70) (70) (94)
Cash Flow from Financing (68) (204) (94) (151) (152) (127)
Inc./(Dec.) in Cash 349 156 104 385 212 353
Opening Cash balances 471 820 976 1,080 1,464 1,676
Closing Cash balances 820 976 1,080 1,464 1,676 2,029
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GSK Consumer | 2QCY2013 Result Update
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Key Ratios
Y/E Dec CY09 CY10 CY11 CY12 CY13E CY14E
Valuation Ratio (x)
P/E (on FDEPS) 77.1 59.2 49.0 40.6 34.5 28.4P/CEPS 64.5 52.2 44.2 37.5 31.7 26.2
P/BV 19.6 18.5 15.5 13.0 10.7 8.6
Dividend yield (%) 0.4 1.2 0.8 1.1 1.1 1.1
EV/Sales 8.8 7.3 6.2 5.3 4.4 3.7
EV/EBITDA 54.5 44.5 39.2 35.0 27.7 22.4
EV / Total Assets 18.9 18.0 15.0 12.4 9.9 7.8
Per Share Data (`)EPS (Basic) 54.7 71.2 86.0 103.9 122.2 148.7
EPS (fully diluted) 54.7 71.2 86.0 103.9 122.2 148.7
Cash EPS 65.3 80.7 95.4 112.4 133.1 160.9
DPS 18.0 50.0 35.0 45.0 45.0 45.0
Book Value 215.2 228.3 272.1 323.6 392.8 488.8
Returns (%)
RoCE 32.3 36.9 37.0 35.4 36.5 35.5
Angel RoIC (Pre-tax) 94.2 1,418.7 - - - -
RoE 27.9 32.2 33.8 34.9 34.1 33.7
Turnover ratios (x)
Asset Turnover 4.3 3.9 4.7 5.2 3.8 3.8
Inventory / Sales (days) 51 49 50 49 49 49
Receivables (days) 6 8 13 10 9 9
Payables (days) 71 74 89 98 91 86
Net working capital (days) (30) (56) (43) (65) (50) (43)
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GSK Consumer | 2QCY2013 Result Update
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Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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Disclosure of Interest Statement GSK Consumer
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