Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
SBCH: Competitive pressure - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Feb 6, 2002

    SBCH: Competitive pressure

    FMCG sector continues to feel the heat of an economic slowdown. This is reflected in the slowing revenue growth of SmithKline Beecham Consumer Healthcare (SBCH). The company's turnover in the December quarter rose in single digits compared to a 21% rise recorded in 1HFY02. Although, it managed to improve operating margins, higher interest burden pressurized earnings.

    (Rs m) 4QFY01 4QFY02 Change FY01 FY02 Change
    Net Sales 1,999 2,163 8.2% 7,357 8,353 13.5%
    Other Income 91 104 14.3% 289 363 25.6%
    Expenditure 1,620 1,725 6.5% 5,948 6,569 10.4%
    Operating Profit (EBDIT) 379 438 15.6% 1,409 1,784 26.6%
    Operating Profit Margin (%) 19.0% 20.3%   19.1% 21.4%  
    Interest 12 28 129.2% 44 71 61.5%
    Depreciation 36 36 -1.1% 137 136 -0.2%
    Profit before Tax 422 479 13.5% 1,517 1,940 27.8%
    Tax 104 175 68.3% 397 639 60.9%
    Profit after Tax/(Loss) 318 304 -4.4% 1,120 1,301 16.1%
    Net profit margin (%) 15.9% 14.0%   15.2% 15.6%  
    No. of Shares 45.4 45.4   45.4 45.4  
    Diluted Earnings per share* 28.0 26.8   32.9 38.2  
    P/E Ratio   14.6     10.3  

    The company's revenues, in fact, started growing at a slower pace in the third quarter only (9% YoY growth). With increasing competition ('Bournvita' from Cadbury and 'Milo' from Nestle) and slower demand, revenue growth was further impacted in the fourth quarter. Its turnover of Rs 8.4 bn for entire 2001 is about 4% lower than Rs 8.6 bn estimated by us.

    SBCH's operating margins continue to rise on the back of its cost control initiatives. The consumption of raw material, as a proportion to sales, declined to 37% in 4QFY02 from 51% in the comparable previous period. The company also managed to reduce its advertising to sales ratio to 11.7% from 12.3% in 4QFY01. However, rise in inventory cost due to slowing demand, curtailed a further improvement in operating margins. Overall operating efficiencies soared SBCH's operating profits by 16% during the quarter and 27% for the full year.

    Expenses as a % of sales
    (Rs m) 4QFY01 4QFY02 Change FY01 FY02 Change
    Stock -3.8% 6.3% - 0.6% 0.4% -18.9%
    Raw material consumption 41.0% 29.5% -22.3% 39.6% 34.2% -1.7%
    Finished goods 0.6% 0.7% 25.9% 1.0% 0.7% -21.8%
    Staff cost 7.4% 8.3% 21.3% 8.0% 8.5% 19.5%
    Advertisment cost 9.9% 9.3% 1.5% 9.4% 8.7% 4.3%
    Other expenses 25.9% 25.6% 7.2% 23.4% 26.2% 26.7%

    The company has provided Rs 34 m in FY02 as provision for deferred tax which is included in the tax figure. Excluding this, profits have grown by 16%. Bottomline growth was also depressed by a rise in effective tax rate (excluding deferred tax) to 33% in FY02 from 26% in the previous year. The impact of taxation on net earnings is clearly reflected from a strong rise of 28% in pre tax profits of FY02.

    At the current market price of Rs 392, SBCH is trading at a P/E of 10.3x FY02 earnings. Although, its P/E multiple is lower compared to its FMCG peers, the company's market cap to sales ratio of 2x is more or less comparable to other food majors.



    Equitymaster requests your view! Post a comment on "SBCH: Competitive pressure". Click here!


    More Views on News

    GSK Consumer: On the Recovery Path (Quarterly Results Update - Detailed)

    Jun 20, 2017

    While GSK consumer reported muted revenue growth, volumes are seen to be recovering.

    GSK Consumer: Price Hike Hurts Volumes (Quarterly Results Update - Detailed)

    Nov 30, 2016

    GSK Consumer Healthcare declared results for the quarter ended September 2016. The revenues dropped by 1.3% during the quarter as compared to a year ago; while the profits declined by 16.6% YoY during the quarter.

    GSK Consumer: Slowdown in demand impacts sales (Quarterly Results Update - Detailed)

    Oct 5, 2016

    GSK Consumer Healthcare has announced the first quarter results of the financial year 2016-2017 (1QFY17). The company's sales declined by 1.4% YoY while net profit rose by 2.9% YoY during the quarter.

    GSK Consumer: A Forgetful Year (Quarterly Results Update - Detailed)

    Jun 1, 2016

    GSK Consumer Healthcare announced its results for the quarter and year ended March 2016. During the quarter, sales and profit came in lower by 9% YoY and 8% YoY respectively.

    GSK Consumer: Feeling the Growth Pressures? (Quarterly Results Update - Detailed)

    Feb 15, 2016

    GSK Consumer Healthcare announced its results for the quarter ended December 2015. While revenues were up by 2% YoY, profits were higher by 37% YoY.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)


    • Track your investment in GSK CONSUMER with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Compare Company With Charts