SBCH turnover jumps 25% - Views on News from Equitymaster

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SBCH turnover jumps 25%

Apr 20, 2001

SmithKline Beecham Consumer Healthcare (SBCH) has declared a 26% jump in its 1QFY02 bottomline YoY. The company not only continues to show strong growth in its net profits, its topline too has grown by nearly 25% YoY.

(Rs m) 1QFY01 1QFY02 Change
Gross Sales 1,726 2,152 24.7%
Other Income 110 83 -24.5%
Expenditure 1,467 1,747 19.1%
Operating Profit (EBDIT) 259 406 56.6%
Operating Profit Margin (%) 15.0% 18.8%  
Interest 22 24 7.7%
Depreciation 37 33 -11.1%
Profit before Tax 311 432 38.9%
Tax 84 122 45.6%
Extraordinary expenses   24  
Profit after Tax/(Loss) 227 285 25.7%
Net profit margin (%) 13.2% 13.3%  
No. of Shares (eoy) (m) 45.4 45.4  
Diluted Earnings per share* 20.0 25.2  
*(annualised)      
Current P/e ratio   15.7  

SBCH is one of the few FMCG companies to show double digit growth in turnover. In FY01 too, the company finished the year with a 19% topline growth YoY.

SBCH strengthened its dominating position in the malted beverages segment with the acquisition of Viva and Maltova brands from Jagatjit Industries. The company is spending Rs 2.4 bn on a new plant (26,000 tonnes per annum) to manufacture 'Horlicks' (its main brand). This will enable it in overcoming a potential capacity constraint in the future. Moreover steps are being taken to increase capacity at its existing plant by 6,000 tonnes per annum. Productivity levels are expected to improve substantially as the new plant is based on the latest available technology. However, the profit margin growth of the company has stagnated, as it will not be able to capitalise the expenditure.

SBCH will act as a sourcing base for malted food drinks for the parent company’s other Asian markets, once the expanded capacity is commissioned. Horlicks exports will thereafter aid volume growth.

At the current levels, the SBCH stock quotes at a P/e multiple of 15.7 times its annualised 1QFY02 earnings. Given SBCH's consistent track record, the company will more likely than not emerge stronger after the capacity expansion.

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