MOSL: GSK CONSUMER (Neutral)-Profits in line-RM inflation to keep margins under check
GSK CONSUMER: Profits in line; RM inflation to keep margins under check
(SKB IN, Mkt Cap USD5.4b, CMP INR9245, TP INR9480, 3% Upside, Neutral)
- While profits were in line, sales were significantly affected by a sharp decline in exports and a poor performance in the foods business.
- According to management, the focus on top-line growth may keep near-term margins under check.
- Given the nature of the Hindustan Unilever and GSK Consumer’s (SKB) transaction, the stock price of the latter will track that of the former and not its own financial performance. Maintain Neutral.
Sales below expectations; significant beat on operating margins
- Sales grew 3.8% YoY to INR11.6b (our estimate: INR12.7b). HFD volume growth stood at 3% YoY. EBITDA grew 14.1% YoY to INR2.7b (our estimate: INR2.8b), PBT was up 12.2% YoY at INR3.7b (our estimate: INR3.7b) and adj. PAT increased 32.6% YoY to INR2.8b (our estimate: INR2.9b).
- Gross margin contracted 130bp YoY to 69.4%. EBITDA margin improved 210bp YoY to 23.5% (our estimate: 22.1%).
- Value market share (L3M Dec’19) stood at 44.3% for Horlicks (+130bp YoY/+60bp QoQ) and at 11.5% for Boost (+70bp YoY/+10bp QoQ). Volume market share (L3M Dec’19) stood at 51.5% and 15.4% for Horlicks and Boost,
- For 9MFY20, revenue/EBITDA/PAT increased 5.8%/15.3%/29.5% YoY.
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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