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Godrej Cons: Acquisitions boost
May 3, 2011

Godrej Consumer Products Ltd. has announced its fourth quarter results of financial year 2010-2011. The company has reported a 96.5% YoY and 54% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Top line for Godrej Consumer Products Limited grew by 96% during 4QFY11.
  • Operating (EBITDA) margin fell by 3.2% YoY during the quarter. This comes on the back of higher raw material costs, increase in staff costs and advertisement expenditure (all as a percentage of sales).
  • Net profits grew by 54.4% YoY during the quarter. This was slower than operating profit growth as a result of pressure from a sharp increase in interest costs, higher depreciation and rise in effective tax rate.

Consolidated financials
(Rs m) 4QFY10 4QFY11 % Change FY10 FY11 % Change
Net sales 5,124 10,069 96.5% 20,569 36,642 78.1%
Expenditure 4,017 8,218 104.6% 16,339 30,023 83.7%
Operating profit (EBDITA) 1,107 1,851 67.2% 4,230 6,620 56.5%
EBDITA margin (%) 21.6% 18.4%   20.6% 18.1%  
Other income 90 287 217.1% 317 517 63.2%
Interest 27 192 609.3% 111 519 367.7%
Depreciation 61 133 119.0% 236 499 111.5%
Profit before tax 1,110 1,814 63.4% 4,199 6,118 45.7%
Exceptional Items - -   - 411  
Tax 192 397 106.5% 803 1,382 72.1%
Profit after tax/(loss) 918 1,417 54.4% 3,396 5,147 51.6%
Net profit margin (%) 17.9% 14.1%   16.5% 14.0%  
No. of shares (m) 308 324   308 324  
Diluted earnings per share (Rs)*         15.9  
Price to earnings ratio (x)*         24.7  
* On a trailing 12 months basis

What we expect?
At the current price of Rs 393, the stock is trading at 34.8 times our estimated FY13 earnings (RPro subscribers can click here). The company has benefited from its new acquisitions for the quarter. However, going forward, once the base effect of the acquisitions gets adjusted we expect the company's growth rate to moderate. Nevertheless, we remain positive on the company's long term prospects. However, we believe that growth from 2-3 years prospective has been priced in the stock. For this reason, we advise our subscribers to be cautious on this stock. We will update our analysis shortly.

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