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GlaxoSmithkline Consumer Healthcare 4QCY2012 performance highlights and results update

Contributed by Angel Broking

For 4QCY2012 GlaxoSmithkline Consumer Healthcare (GSK Consumer) posted a 17.9% yoy growth in net profit to Rs.70cr, aided by a 161bp yoy improvement in gross margin and a 46.6% yoy increase in auxiliary income.

Key highlights of the quarter: For 4QCY2012 GSK Consumer posted a 17.8% yoy growth in net sales, aided by an 8% volume growth. The top-line growth was reasonably strong despite lower offtake by the canteen stores department (CSD). The company’s sales volume has been impacted by low CSD offtake since the beginning of CY2012. Better pricing resulted in a 161bp yoy increase in gross margin, despite the increase in cost of raw materials such as wheat, sugar etc. However, OPM was down by 305bp yoy to 7.2%, due to the steep 37.1% yoy increase in other expenses to Rs.206cr. On a positive note, the company posted a 46.6% yoy increase in auxiliary income to Rs.25cr. The effective tax rate too was down by 658bp yoy resulting in a 17.9% yoy increase in net profit to Rs.70cr.

Outlook and valuation: We expect the company’s malted food drinks (MFD) division to continue to post double digit growth, aided by the company’s efforts to strengthen its distribution network. The stock has run up steeply post the open offer announcement by the promoters. At the current market price, the stock is trading at 31.2x CY2013E EPS of Rs.123. We continue to remain Neutral on the stock.