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, GCPL’s top-line grew 9.4% yoy to
`1,889cr. The company’s 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 company’s 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 GCPL’s 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
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 company’s 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 company’s 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, GCPL’s
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: GCPL’s acquisitions have been in line with
its 3X3 strategy and are expected to enable the company to spread its footprint
and grow inorganically. GCPL’s 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, GHPL’s strong presence in southern India complements
GCPL’s strong presence in northern India extremely well, giving GCPL a
balanced presence.
Outlook and valuation
Going ahead we expect GCPL’s 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)
10. GCPL | 1QFY2015 Result Update
July 31, 2014 10
Research Team Tel: 022 - 39357800 E-mail: research@angelbroking.com Website: www.angelbroking.com
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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%)
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