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GSK Consumer 5QFY2014 performance highlights and results update

May 19, 2014, Monday, 07:12 GMT | 02:12 EST | 10:42 IST | 13:12 SGT
Contributed by Angel Broking

For 5QFY2014, GlaxoSmithkline Consumer Healthcare (GSK Consumer) posted a 9.8% yoy growth in net profit to Rs.172cr, aided by healthy performance on the operating front.

Key highlights of the quarter: For 5QFY2014 GSK Consumer’s top-line rose by 14.8% yoy to Rs.1,079cr, aided by higher volumes (up 7% yoy) and better realization. The Health food drinks (HFD) and Packaged foods divisions grew by 13% yoy and 32% yoy respectively. The company’s flagship brands in the HFD division - Horlicks and Boost – posted a volume growth of 8% and 6% respectively. The company’s exports business grew by 13% yoy during the quarter. GSK Consumer’s gross margins declined by 85bp yoy to 61.3%, impacted by steep increase in the prices of milk and milk products. The company stepped up its advertisement expenditure by 16.6% yoy to counter the slowdown prevailing in the market. Lower gross margins and higher advertisement expenses resulted in a 63bp yoy decline in the OPM to 17.5%.

Outlook and valuation: We expect GSK Consumer’s HFD division to continue to post double digit growth, aided by its efforts to strengthen the distribution network. At the current market price, the stock is trading at 26.5x FY2016E EPS of Rs.165. We continue to remain Neutral on the stock as we believe it is fairly priced.