MOSL: GSK CONSUMER (Sell)-Market share continues to decline-schemes impact gross margin
​GSK Consumer: Market share continues to decline; schemes impact gross margin
(SKB IN, Mkt Cap USD3.5b, CMP INR5505, TP INR4500, 18% Downside, Sell)
- GSK Consumer (SKB) posted 4.4% YoY net sales growth (including operating income; our estimate: -2%) to INR9.9b. EBITDA declined 18.3% YoY (our estimate: -11.1%) to INR1.7b, while adjusted PAT fell 17.7% YoY (our estimate: -6.9%) to INR1.3b. Gross sales declined 1.3% YoY to INR10.5b but lower excise duty led to higher net sales growth. MFD volumes were flat. Performance was impacted by loss of CSD sales and GST-related impact on wholesale channel.
- Gross margin contracted 550bp YoY to 65.2%. Higher ad spend (+10bp YoY to 13%) and staff costs (+20bp YoY to 13.6%) were partially offset by a decrease in other expenditure (-110bp to 21.8%). EBITDA margin contracted 470bp YoY (our estimate: -200bp) to 16.9%.
- Concall highlights: (1) Management reiterated price increase is and will be in line with CPI – this is strange, as it increases prices every year irrespective of commodity basket movement. (2) 1QFY18 was the second consecutive quarter of market share decline YoY and QoQ; this is partly because the adult protein segment is growing fast and SKB does not have presence there.
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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