X

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.
Gillette: Razor's edge - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Mar 14, 2005

    Gillette: Razor's edge

    Synonymous with shaving and a dominant brand in personal grooming, oral care and portable power products, Gillette USA, operates in India through it's 52% subsidiary Gillette India Ltd. Since India is an upcoming economy, let's see what the company's strategy is for this region and evaluate its journey so far.

    Background
    Earlier known as Indian Shaving Products, the company's presence in India is over two decades old. The company was rechristened to Gillette India Limited in CY00, the same year in which it consolidated its Indian operations, by merging all existing businesses in India under a single fold. Gillette India is the 52% subsidiary of US shaving major - Gillette USA. The company's promoter groups' (including the Indian partners) together hold 88.8% in the company. The company recently hived off its battery manufacturing (Duracell and Geep) plant at Manesar and is now a focused shaving product major, which also markets the Duracell range of batteries.

    Over the years…
    (Rs m) CY00 CY01 CY02 CY03 CY04 1yr YoY change
    (CY04 / CY03)
    CAGR
    Sales 5,168 4,951 3,830 3,631 4,063 11.9% -6%
    Other Income 197 166 131 145 189 30.3%
    Expenditure 4,694 4,492 3,388 3,092 3,113 0.7% -10%
    EBDIT 474 459 442 539 951 76.4% 19%
    OPM % 9.2% 9.3% 11.5% 14.8% 23.4%
    Net profit after tax(loss) 264 -278 65 448 612 36.5% 23%

    From the above table, it is visible that till CY03, the topline declined year by year, but in CY04, the company posted a good 12% growth reflecting a comeback. After the restructuring activities the company has stuck to it's cost cutting programme of 4% every year and this is evident in the bottomline which has grown at a rate of 23% on a compounded basis despite sales falling by 6% over CY00. In the current year, the company achieved record operating margins of 23%, the highest since its two decades of presence in India. During the CY03, the company launched Gillette Vector Plus, with a technology that enabled low water usage, especially developed to cater to the Indian market. It was aimed at the mid-priced segment.

    Strategy
    The companies' activities are divided into two units, manufacturing and marketing. In India, it manufactures shaving system and cartridges, safety razor blades, torches and components. It markets products in oral care, toothbrushes (Oral B range) and toiletries (shave gels, deo-sprays). The marketed products are imports from the parent's 120 country presence and Gillette India receives only a distribution margin for selling those products. It's top of the line products like Mach 3 and Sensor Excel are also imported, as they are only manufactured at two plants worldwide.

    Competition
    Gillette has a dominant worldwide market leadership in all its three core categories viz. blades, batteries and toothbrush. In some parts, its blades marketshare is as high as 91%, making it the undisputed leader worldwide. The company protects its technological leadership by designing as well as manufacturing the machines required to manufacture razors as well as cartridges. It also has a number of patents for its brands like Mach 3 and Sensor Excel. However, the latest manufactured offering Gillette Vector Plus was developed in India over a period of 4 years with extensive research and development. In India, it faces competition from Colgate-Palmolive, Godrej Consumer Products and more importantly the local players.

    Growth opportunities
    The Indian market has not been totally tapped and penetration levels are yet low for its flagship products. In India, the company is aiming to wean away consumers from the traditional double-edged razor segment to twin blade system through its mid-priced offering 'Vector Plus'. If successful, the company could achieve a new growth trajectory. In terms of potential, nearly 90% of consumers still use double-edged razors, a large part of which Gillette can convert. Slowly and steadily, times are changing with Indian men, beginning to place more emphasis on grooming and taking as much time as the fairer sex at the super market to pick up their favourite cologne, deodorant, aftershave lotion, shaving cream, body talc, face wash, shampoo, and conditioner.

    What's New
    P&G recently acquired Gillette for US$ 57 bn and there may be some minor positive impact, but more negotiating power vis-à-vis global retailers is not going to amount to much. At the same time, the deal creates an enterprise that is unmatched in geographic reach and competitive positioning. Globally, after the acquisition, P&G will become the market leader dethroning Unilever who held the position for a long time.

    As far as its Indian operations are concerned, the acquisition is no doubt a big positive for P&G in India. However, investors have to be aware of two factors here. One, P&G, besides the listed company in India, has other 100% subsidiaries in India. In fact, products like Ariel and Pantene are marketed through the 100% subsidiary and the listed entity (P&G Hygiene) has only two major brands in its portfolio i.e. Vicks and Whisper. Even if the deal goes through, it is unlikely that P&G Hygiene will get access to the Gillette folio. They may at best be marketers or manufacturers of some of the Gillette products.

    What to expect
    The stock currently trades at Rs 625, transforming into a rich valuation of 34x CY04 earnings, which is at the higher end of the spectrum. In India, the company is aiming to wean away consumers from the traditional double edged razor segment to twin blade system through its mid-priced offering 'Vector Plus', and the ‘Gillette Presto' range. As mentioned earlier, nearly 90% of consumers still use double edged razors, a large part of which Gillette is trying to convert.

    But all said and done, the low liquidity in the company leaves little on the table for the public investors. By all parameters, it looks that the company may be headed for a delisting and therefore, an open offer. But with valuations already too rich, an upside to this is also limited.

    More Views on News

    Marico: Earnings Hit by Lower Volumes and Firming Input Prices (Quarterly Results Update - Detailed)

    Aug 9, 2017

    While GST implementation brought down volumes and profitability in the short run, Marico remains optimistic in the long run.

    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...

    More
    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

    GILLETTE INDIA SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK GILLETTE INDIA

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

    MORE ON GILLETTE INDIA

    GILLETTE INDIA - HYPERMARCAS COMPARISON

    Compare Company With Charts

    COMPARE GILLETTE INDIA WITH

    MARKET STATS