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Godrej Consumer Products 3QFY2013 performance highlights and results update

Contributed by Angel Broking

Godrej Consumer Products Ltd (GCPL), in its 3QFY2013 results, reported an impressive top-line growth of 25.8% yoy to Rs.1,691cr. The domestic business registered a growth of 20% yoy on account of strong growth across categories. The international business registered a growth of 34%, aided by an impressive performance by the Indonesia business (Megasari), which grew by 30% yoy and consolidation of phase II geographies of Darling group.

Key highlights of the quarter: On the domestic front Home care, Soaps and Hair Care segments posted a top-line growth of 28% yoy, 20% yoy and 17% yoy respectively. The company continued to gain market share and enjoy leadership across all formats of electrics, coils and aerosols. It recently launched Goodknight Advanced Colour Play in the electric format. Indonesian and African businesses posted a top-line growth of 30% and 21.5% yoy, respectively. The OPM fell by 315bp yoy to 16.6%, due to the steep 61% yoy increase in advertisement and promotion (A&P) expenses. A&P expenses as a percentage of sales went up by 236bp on a yoy basis. The fall in OPM was also to an extent due to the steep 1,070bp decline in the margins of African business on a high base. The bottomline rose by a marginal 3% yoy to Rs.172cr impacted by OPM compression, lower other income and higher tax rate (up 293bp yoy to 26.2%).

Outlook and valuation: At the current market price, the stock is trading at 26.2x FY2014E consolidated earnings. After valuing the company’s various international subsidiaries and giving effect to their varied geographic presence, we believe the current implied valuation of the domestic business is at fair levels. We maintain our Neutral rating on the stock.