MOSL: GODREJ CONSUMER (Neutral)-Difficult times persist for HI segment, profitability to improve sequentially
Godrej Consumer: Difficult times persist for HI segment, profitability to improve sequentially
(GCPL IN, Mkt Cap USD10.9b, CMP INR757, TP INR805, 6% Upside, Neutral)
- Godrej Consumer's (GCPL) 3QFY19 consolidated net sales (including OOI) grew 3.5% YoY to INR27.2b (est. INR28.7b). Consol. comparable net sales (adjusting for divestment of Europe business) grew 7% YoY. Consol. Adj. EBITDA grew by 2.9% YoY to INR6.2b (est. INR6.4b) and Adj. PAT declined 3.4% YoY to INR4.2b (est. INR4.6b).
- India branded business volumes grew 1% during the quarter. Soaps grew 2% YoY while Household Insecticides (HI) and the Hair Color business remained flat. Management attributed the subdued performance in Soap and Hair Color to a high base, while HI was impacted by unfavorable season in South India and share of growth shifting towards incense sticks.
- Gross margins down 90bp YoY to 56.2%. Lower ad spends (down 60bp YoY to 8% of sales) and staff costs (down 40bp YoY to 10.3% of sales) were slightly offset by increase in other expenses (up 20bp YoY to 15.4% of sales). This led to EBITDA margin contraction of 10bp YoY to 22.6% (v/s est. 22.3%).
- 9MFY19 consolidated performance: Sales, EBITDA and adj. PAT grew 7.4%, 7.5% and 6.1%, respectively. EBITDA margin stood flat at 20.4%.
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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