Godrej Consumer Products' Q3FY18 results (Outperformer) - Domestic outperformance continues to drive earnings!
Q3FY18 result highlights
- Consolidated revenues were up 8.9% yoy at Rs26bn (est:Rs26bn); EBITDA increased 13% yoy at Rs5.7bn(est: Rs5.9bn) and Adjusted PAT increased 21% yoy at Rs4.2bn (est Rs4.2bn).
- Comparable revenues increased by 8% yoy, with India business revenue growth of 17% yoy and flat International business sales (constant currency growth of 5% yoy).
- India sales were led by 18% yoy volume growth. On comparable basis, HI, Soaps and Hair colors sales grew by 5%,24% and 33% yoy respectively while other brand sales increased by 30%.
- Consolidated gross margins were up 90bps yoy. A&P spends were up by 70bps yoy to 8.7%. Staff cost and other expenses increased by 37% and 9.5% yoy respectively. Resultant EBITDA margin increased by 80bps to 22%.
- International business net sales were flat (constant currency growth of 5% yoy). In constant currency terms, Africa, Latam and Europe sales increased by 10%/5%/9% while Indonesia sales declined by 2% yoy.
Key positives: Strong volume growth in India
Key negatives: Weakness in international business performance
Impact on financials: Our earnings estimates remain unchanged.
Valuations & view
GCPL’s domestic business has outperformed across metrics, especially with industry leading volume growth of 18%. Though the current pace of volume growth is not sustainable, we believe a double digit volume growth trajectory is achievable going forward. The international business has been negatively impacted in FY18, especially due to heightened competitive intensity in Indonesia. We believe the gradual improvement in Indonesia revenues, coupled with return to normal double digit growth in Latin America and continued steady growth in Africa will result in a better international performance from Q4FY18. Further, continued focus on reducing working capital (as demonstrated in FY18E) will aid sustained improvement in return ratios. We maintain our positive longer term outlook and Outperformer rating on GCPL.
Godrej Consumer Products is a consumer goods company, manufacturing and marketing Household and Personal Care products. Co. is engaged in the manufacture and sale of soaps, cosmetics and detergents. Co.'s Personal Care products include Godrej No.1 - soaps; Cinthol - soaps, deodorants, talcs and shower gels; Godrej protekt - washes, a hand sanitiser and a personal mosquito repellent spray; and Godrej expert - creme hair colour in a sachet, powder hair colour with a unique gel technology, and herbal hair colour. Co.'s home care products include Good Knight - mosquito repellents; HIT - household insecticides; Godrej aer - home and car air fresheners; and Godrej Ezee - liquid detergents.
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