MOSL: GODREJ CONSUMER (Neutral)-Africa drags international performance, domestic demand improving
Godrej Consumer: Africa drags international performance, domestic demand improving
(GCPL IN, Mkt Cap USD13.0b, CMP INR1312, TP INR1240, 5% Downside, Neutral)
- Godrej Consumer's (GCPL) 1QFY19 consol. net sales (including OOI) grew 13.7% YoY to INR24.8b (est. of INR25.2b excl. OOI). Consol. comparable (adjusted for GST accounting effect) constant currency sales grew 10% YoY in 1QFY19, with India business reporting 14% growth.
- India branded business volumes grew 14% YoY. Household Insecticides reported comparable 17% YoY sales growth. Soaps sales grew 10% YoY (led by double-digit volume growth), while Hair color sales increased 12% YoY.
- Gross margin expanded 230bp YoY to 55.8%. High staff cost (+90bp YoY to 12%) was majorly offset by lower ad spends (-30bp YoY to 8.4%) and other expenses (-30bp YoY to 17.3%), resulting in EBITDA margin expansion of 210bp YoY to 18.1%.
- EBITDA grew 28.4% YoY to INR4.5b (est. of INR4.4b excl. OOI). Adj. PAT grew 36.5% to INR3.2b (est. of INR3b). Note that PAT is adjusted for a deferred tax asset amounting to INR938.1m during the quarter, on account of sale of certain brands within the Group entities that shall derive benefits of future tax deductions for the Group.
- Concall highlights: (1) Urban and rural businesses grew by 13% and 17%, respectively. Management expects rural business to continue growing faster. (2) Prices were increased in Hair colour and Home fresheners toward end-1QFY19, which will reflect more prominently 2QFY19 onward.
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.
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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