On the surface Gillette India had a bad 2001. The company finished its financial year with Rs 278 m as net loss. The company also reported a 4% dip in turnover YoY. However, 2001 may well be the base on which Gillette India will launch its expected recovery in 2002.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy) (m)
Diluted Earnings per share*
True that FY02 has not been a great year for Gillette India. But this has got a lot to do with its Duracell business and its plants than with anything else. The company's Mach 3 brand is reportedly growing at over 35% per annum and the newly bought Wilkinson brand grew by 10% during the year. However, Duracell registered a 4% decline. The Geep line of products is growing at over 9%.
Gillette has been under pressure ever since it acquired Duracell and Wilkinson in 2000. Though this move added to the company's topline, higher interest and depreciation burden hit the company's profitability. However, the company has taken steps to restructure this anomaly.
Advertising & selling
The company decided to sell Duracell India plant to Duracell Belgium for a consideration of US$ 6.5 m. It closed the Duracell plant at Manesar and consequently took a hit of Rs 606 m for its closure. This component is largely the reason for Gillette India ending FY02 in red. The 50% decline in 4QFY02 is also brought about by the Duracell closure. A major positive for the company is the capital grant of Rs 850 m (US$ 17.5 m) from its parent. The monies realised will be used to retire debts and strive to make Gillette a zero debt company. Also in the coming year, its depreciation will be lower due to the discontinuation of the Duracell plant.
It is no wonder that the stock has run up by almost 40% in the last three months to Rs 375 levels currently. The year 2002 is expected to be a much better year for Gillette India with low interest and depreciation outgo. However, we believe that the stock is valued at these levels in the medium term.
Going by the shrinkage of turnover in 4QFY02 (due to Duracell closure), it is likely that Gillette's turnover in FY03 will be significantly lower than FY02. However, even if we assume a flat turnover growth with an improvement in operating margins to 12%, and assume a depreciation of Rs 240 m and an iterest outgo at Rs 50 m, the stock still trades at a relatively high 28x FY03 estimated earnings with the current number of shares outstanding. But Gillette India seems a good investment in the long term owing to the company's management focus, renowned brands and the parent's resolve to concentrate on the Indian shaving products market.
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: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407