MOSL: GSK CONSUMER (Downgrade to Sell)-Structural story remains weak-market share decline the last straw
​GSK Consumer: Structural story remains weak; market share decline the last straw, Downgrade to Sell
(SKB IN, Mkt Cap USD3.3b, CMP INR5260, TP INR4380, 17% Downside, Downgrade to Sell)
- GNP FY17 sales came at INR90b (18% YoY) with EBITDA margin at 20.3% and PAT at INR11.1b (up 58% YoY).Net sales for the quarter grew ~11.5% YoY (-2% QoQ) to ~INR24.2b (est. of ~INR30b). This strong disappointment is attributed to lower US sales of INR10b (INR12b in 3Q). EBITDA margin came in at 17%, below our estimate of 33%, due to ~USD50m lower US sales, R&D expense of ~14.5% and forex impact of ~INR1.4b. PAT increased 23.5% YoY to INR1.8b (est. of INR6.2b).
- Gross margin contracted 210bp YoY to 65.8%. EBITDA margin contracted 10bp YoY (our estimate: 50bp decline) to 19.7%. EBITDA grew 1.5% YoY (our estimate: 3.5% decline) to INR2.17b. Adjusted PAT grew 8.4% YoY to INR 1.76b, ahead of EBITDA growth due to high other income (up 42% YoY).
- FY17 performance: Sales, EBITDA and adjusted PAT declined by 3.6%, 1% and 4.5%, respectively. EBITDA margin expanded 55bp YoY to 20.9%.
- Concall highlights: (1) In FY17, SKB lost market share in Horlicks by 160bp to 49.3% in volume terms and by 130bp in value terms to ~44%; (2) After demonetization, rural up-stocking is likely to return to normal levels only by June-end, by which time there could be down-stocking due to GST.
GlaxoSmithKline Consumer Healthcare is engaged in the manufacture of health food, malted foods, health drinks, milk fluid and powders, biscuits, health care products and pharmaceutical products and powders. Co.'s flagship product, Horlicks, is scientifically developed and specifically caters to the nutritional needs of the Indian diet. It helps meet the requirements of essential nutrients in children, such as iron and vitamins that aid iron absorption. Horlicks is sold in a number of countries across the world. In addition, Co. also manufactures and markets brands such as Boost, Viva, Maltova, Biscuits, Foodles, Eno, Crocin, Iodex and Sensodyne.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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