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Gillette India: Duracell blues - Views on News from Equitymaster
 
 
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  • Apr 24, 2001

    Gillette India: Duracell blues

    Gillette India (earlier Indian Shaving Products) has improved its 1QFY02 bottomline by a marginal 5%. However, its turnover has shown a marked improvement by 72%. These are the consolidated numbers which include Duracell (India) and Wilkinson Sword India's figures.

    (Rs m) 1QFY01 1QFY02 Change FY01
    Net Sales 621 1,069 72.1% 5,168
    Other Income 34 12 -66.2% 197
    Expenditure 573 949 65.6% 4,694
    Operating Profit (EBDIT) 48 120 150.6% 474
    Operating Profit Margin (%) 7.7% 11.3%   9.2%
    Interest 13 24 87.7% 172
    Depreciation 26 65 149.6% 246
    Profit before Tax 43 42 -1.9% 254
    Other adjustments - -   31
    Tax 6 4 -41.7% 21
    Profit after Tax/(Loss) 37 39 4.6% 264
    Net profit margin (%) 6.0% 3.6%   5.1%
    No. of Shares (eoy) (m) 32.6 32.6   32.6
    Earnings per share* 4.5 4.7   8.1
    Current P/e ratio   77.3   45.3
    *(annualised)        

    Gillette is a leader in the Rs 5 bn Indian shaving blade market with a share of over 40% (in value terms). Its products are marketed under two main umbrella brands; 7 'O Clock and Gillette. Although these amalgamations (especially with Wilkinson) will help Gillette make inroads into the lower segment of the market, the bottomline and profit margins will remain depressed in the coming quarters since both the amalgamated companies are making marginal profits.

    The company's figures have shown a marked decline in bottomline growth since the expenses have been on a consistent uptrend as a result of the amalgamation with Duracell and Wilkinson.

    Expenses as a % of sales FY00 FY01 1QFY02
    Raw material cost 11.1% 18.3% 22.0%
    Staff cost 6.2% 5.7% 7.0%
    Other expenses 19.3% 27.4% 31.6%

    At the current price of Rs 367, the stock is trading at a P/e multiple of 77 times its annualised 1QFY02 earnings, which is the highest among FMCG companies in India. The company has historically got higher valuations based on its global brand name as well as its dominance in the branded shaving product industry of India. Nevertheless the valuations are quite high looking at the short term outlook. In the longer term however, the company might start getting better returns out of its investments.

     

     

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