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GSK Consumer 4QCY2013 performance highlights and results update

February 7, 2014, Friday, 19:00 GMT | 14:00 EST | 23:30 IST | 02:00 SGT
Contributed by Angel Broking

For 4QCY2013, GlaxoSmithkline Consumer Healthcare (GSK Consumer) posted a 14.5% yoy growth in net profit to Rs.80cr, aided by healthy performance on the operating front.
Key highlights of the quarter: For 4QCY2013 GSK Consumer’s top-line rose by 18.3% yoy to Rs.839cr, aided by higher volumes (up 13% yoy) and better realization. Domestic volume growth stood at 11% yoy. The Health food drinks (HFD) and Packaged foods divisions grew by 17% yoy and 29% yoy respectively. The company’s flagship brands in the HFD division - Horlicks and Boost – posted a healthy growth. The company’s exports business grew by 36% yoy during the quarter. GSK Consumer’s gross margins declined by 260bp yoy to 63.4%, impacted by steep increase in the prices of milk and milk products. The company stepped up its advertisement expenditure by 24.2% yoy to counter the slowdown prevailing in the market. However, the decline in OPM was limited to 22bp yoy due to cost control initiatives undertaken by the company.
Outlook and valuation: We expect GSK Consumer’s HFD 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 20.2% respectively over CY2012-14E. At the current market price, the stock is trading at 30.1x CY2014E EPS of Rs.146. We continue to remain Neutral on the stock.