MOSL: GODREJ CONSUMER (Neutral)-Strong volumes in India business-overseas businesses disappoint
Godrej Consumer: Strong volumes in India business; overseas businesses disappoint
(GCPL IN, Mkt Cap USD11.3b, CMP INR1059, TP INR1065, 1% Upside, Neutral)
- 3QFY18 consol. net sales grew 8.9% YoY to INR26b (est. of INR27.5b). Consol. EBITDA grew 12.9% YoY to INR5.7b (est. of INR6.1b) and adj. PAT rose 23.7% YoY to INR4.3b (est. of INR4.2b). Consol. comparable constant currency (CC) sales grew 11% YoY in 3QFY18, with India business posting 17% YoY growth. International business, on a CC basis, reported organic net sales growth of 5% YoY – CC sales declined 2% YoY for Indonesia, but grew by 10% YoY for Africa (incl. US and ME) and by 5% for LATAM.
- India branded business volumes grew 18% YoY. Household Insecticides business reported comparable sales growth of 5% YoY. Soaps sales grew 24% YoY (strong double-digit volume growth), while Hair Color sales were up 33% YoY. 3QFY17 base was favorable for all three businesses.
- Gross margin expanded 100bp YoY to 56.7%. High adspend (+70bp YoY to 8.7%) and a slight rise in staff costs (+10bp YoY to 10.8%) were offset by lower other expenses (-60bp YoY to 15.3%). Thus, EBITDA margin expanded 80bp YoY to 22%.
- Concall highlights: 1) Domestic demand scenario is improving and expected to pick up further in FY19. 2) Have taken price cuts of 6-10% in categories affected by a reduction in GST in November. 3) Management believes that the gradual recovery trend in Indonesia will continue.
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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