MOSL: GODREJ CONSUMER (Neutral)-Price hike-led sales growth in India, Indonesia drags international performance

​Godrej Consumer: Price hike-led sales growth in India, Indonesia drags international performance

(GCPL IN, Mkt Cap USD7.8b, CMP INR1035, TP INR995, 4% Downside, Neutral)

• Godrej Consumer's (GCPL) 1QFY18 consolidated net sales grew 2.8% YoY to INR21.7b (est. of +9%). Consol. EBITDA declined by 9.3% YoY to INR3.5b (est. of +2.9%) and adj. PAT by 9.2% YoY to INR2.3b (est. of +1.3%), representing a miss on all counts. Organic consolidated CC sales grew 6% YoY in 1QFY18, with India business exhibiting similar growth on organic CC basis.
• Gross margin shrunk 20bp YoY to 53.4%. Higher adspend (+80bp YoY to 8.8%) and other expenses (+150bp YoY to 17.6%) were partially offset by lower staff costs (-40bp YoY to 11.1%). Thus, EBITDA margin shrunk 210bp YoY to 15.9%.
• India branded business volume growth came in flat YoY. All three key domestic segments reported YoY sales growth, which came in 4% YoY for Household Insecticides, 7% YoY for Soaps and 5% YoY for Hair Color. India primary net sales growth stood at 6%, while secondary sales increased 9% YoY.
• International: Organic CC net sales grew 7%, while EBITDA fell 5% YoY. CC sales fell 11% YoY in Indonesia, but grew 26% YoY in Africa, 4% in LatAm and 24% in Europe. Indonesia, Africa and LatAm saw EBITDA margin contraction of 390bp, 80bp and 610bp YoY, respectively, while Europe saw expansion of 260bp.