X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 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.
Godrej Cons: Overseas biz remains a drag - Views on News from Equitymaster
MidCapSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Godrej Cons: Overseas biz remains a drag
May 6, 2015

Godrej Consumer Products Ltd. has announced its fourth quarter results of financial year 2015-2016. The company has reported a 8% YoY growth in sales and 12.4% YoY rise in net profit (excluding exceptional item). Here is our analysis of the results.

Performance summary
  • The company registered revenue growth of 8% backed by 10% growth in domestic branded business and 6% increase in overseas sales. For FY15, revenues were up by 9%.
  • Aided by controlled operating expenses, the operating margin improved by 0.8% and 1% in 4QFY15 and FY15 respectively.
  • Net profits grew by 12.4% with a 79% jump in depreciation charges offset by lower interest costs. For FY15, the net profit grew by 19.4%.
  • The company has declared a fourth interim interim dividend of Re 2.50 per share on a face value of Re 1 per share for the financial year 2014-15. The total final dividend for FY15 aggregates to Rs 5.50 per share translating into a dividend yield of around 0.5%.

Consolidated financials
(Rs m) 4QFY14 4QFY15 % Change FY14 FY15 % Change
Total Income 19,315 20,920 8.3% 76,024 82,764 8.9%
Expenditure 15,898 17,052 7.3% 64,189 69,078 7.6%
Operating profit (EBITDA) 3,417 3,869 13.2% 11,835 13,686 15.6%
EBITDA margin (%) 17.7% 18.5% 0.8% 15.6% 16.5% 1.0%
 Other income 194 175 -10.0% 627 915 45.9%
Forex gain/loss (20) 20   (268) (33)  
Interest 269 241 -10.4% 1,074 1,002 -6.7%
Depreciation 128 229 78.9% 819 908 10.9%
Profit before tax 3,194 3,593 12.5% 10,302 12,659 22.9%
Exceptional Items 32 1   (6) (172)  
Tax 737 823 11.7% 2,104 2,723 29.4%
Profit after tax/(loss) 2,488 2,771 11.3% 8,193 9,764 19.2%
Share of profit in associate firm (2) 2   (1)  0  
Minority Interest 123 117 -5.4% 595 694 16.5%
Net profit after minority interest 2,363 2,656 12.4% 7,597 9,071 19.4%
Net profit margin (%) 12.2% 12.7% 0.5% 10.0% 11.0% 1.0%
No. of shares (m)         340  
Diluted earnings per share (Rs)*         26.6  
Price to earnings ratio (x)*         40.7  
* On a trailing 12 months basis

What has driven growth in 4QFY15?
  • GCPL recorded a growth of 8% in total income. Domestic business grew by 10% led by volume growth of 8%. The household insecticides (HI) business maintained its growth momentum of 11% in 4QFY15 with market share gains across all the formats and the GoodKnight brand crossing Rs 15 bn mark. Hair colours clocked a volume led growth of 12%. Godrej Expert Rich crème continued to outpacethe category driven by distribution reach and activation programs. In soaps, GCPL posted a 15% value growth well ahead of the category that has grown in low single digits during the quarter. It's Godrej No 1 and Cinthol brands have crossed the Rs 10 bn and 5 bn marks respectively. The company's domestic branded business growth was nearly 1.4 times the growth in the overall home & personal care category.

  • The international business grew by a tepid 6% with a constant currency sales growth of 14%. The performance was led by double-digit growth reported by Africa and Latin America. Largest market, Indonesia saw de-growth of 1% due to one-off de-stocking by modern retailers and floods that impacted the HI business as well as currency depreciation. Even the recovery in the European business was offset by translational losses resulting in a 2% fall in sales for the quarter.

      4QFY14 4QFY15 Change in basis points
    Total Cost of goods 47.8% 44.5% -328.91
    Staff Cost 9.6% 9.1% -50.83
    Advertising 7.5% 11.0% 345.53
    Other Expenditure 17.4% 16.9% -45.84

  • The company has managed to expand operating margin by 0.8% on the back of savings in input costs, staff costs and other expenses (all as a proportion of sales). A part of the savings was invested in brands resulting in a 3.5% jump in ad-spends-to-sales ratio for the quarter. In the domestic business, operating margin expanded by 60 basis points. In the international operations, only Indonesia and LATAM reported incremental margins of 2% and 1.3% respectively driven by price hikes and scale benefits. The African region reported a 3.4% fall in operating margin due to currency depreciation. Europe saw its EBIDTA margin erode by 0.8% due to higher brand investments.

  • The net margin increased by 0.5% due to steep rise in depreciation charges whose impact was partially mitigated by a fall in interest charges. The other income earned was down by 10% during the quarter.
What to expect?
GCPL's financial performance in the first half of FY15 was adversely impacted by slowdown in its HI business due to irregular monsoon. As a result, the company's sales growth in FY15 slowed down in single digits for the first time in a decade. Going ahead, the company's presence in underpenetrated categories such as HI and hair colours along with a portfolio of innovative products are expected to deliver growth on a revival in economic environment in the domestic and international markets.

At a price of Rs 1084, the stock is trading at 41 times its trailing twelve months earnings. As the stock continues to remain overvalued, we would recommend investors not to Buy the stock at current price levels.

To Read the Full Story, Subscribe or Sign In



DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group.

BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes.

DISCIPLINARY HISTORY:
There are no outstanding litigations against the Company, it subsidiaries and its Directors.

GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT:
For the terms and conditions for research reports click here.

DETAILS OF ASSOCIATES:
Details of Associates are available here.

DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company.
  2. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
  3. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report.
DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:
  1. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months.
  2. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months.
  3. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  4. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  5. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
GENERAL DISCLOSURES:
  1. The Research Analyst has not served as an officer, director or employee of the subject company.
  2. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company.
Definitions of Terms Used:
  1. Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service.
  2. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price.
  3. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service.
  4. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service.
Feedback:
If you have any feedback or query or wish to report a matter, please do not hesitate to write to us.

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

GODREJ CONSUMER SHARE PRICE


Dec 13, 2017 (Close)

TRACK GODREJ CONSUMER

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

MORE ON GODREJ CONSUMER

GODREJ CONSUMER 5-YR ANALYSIS

COMPARE GODREJ CONSUMER WITH

MARKET STATS