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GSK Consumer: On the Recovery Path - Views on News from Equitymaster
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GSK Consumer: On the Recovery Path
Jun 20, 2017

GSK Consumer declared results for the quarter ended March 2017. The revenues were up by 1.4% during the quarter as compared to a year ago; while the profits too were up by 8.4% YoY during the quarter. Here is our analysis of the results.

Performance Summary
  • GSK Consumer reported muted results for the quarter. Total revenue (including auxiliary income) grew marginally by 1.4% YoY.
  • While sales were adversely impacted as a result of lower consumer offtake and reduction in trade pipelines particularly in the immediate aftermath of the Government's decision to withdraw specified high denomination currency notes the company was able to successfully increase penetration and uptake through the re-launch of Rs 5 packs of Horlicks and Boost, late last year.
  • The company saw a rise in cost of raw materials during the quarter, however it was offset by a decline in employee costs. The company also reported an increase in its advertisement expense of 11.7% against the same quarter. Thus, EBITDA margin stayed flat for the quarter at 18%.
  • Net profits grew 8.4% YoY during the quarter on the back of recovery in volumes.
  • However, the bottom-line fell 4.4% in FY17 YoY owing to depressed volumes in the previous quarters.
  • The company proposed a dividend of Rs 70 per share of the face value of Rs 10 each. At the current price, the dividend yield works to 1.3%.

    Financial Performance Snapshot
    Rs(m) 4QFY16 4QFY17 Change FY16 FY17 Change
    Revenues 11,922 12,088 1.40% 45644 44211 -3.10%
    Expenditure 9,784 9,917 1.40% 37262 35876 -3.70%
    Operating profit (EBDITA) 2,139 2,171 1.50% 8,382 8,335 -0.60%
    EBDITA margin (%) 17.90% 18.00% 0.00% 18.40% 18.90% 0.50%
    Other income 501 710 41.70% 2,775 2,439 -12.10%
    Interest 2.6 8.7 234.60% 22.8 27.8 21.90%
    Depreciation 146 177 21.30% 577 642 11.20%
    Profit before tax 2,491 2,695 8.20% 10,557 10,104 -4.30%
    Extraordinary inc/(exp) - -   - -  
    Tax 869 936 7.70% 3687 3537 -4.00%
    Effective tax rate 35% 35%   35% 35%  
    Profit after tax/(loss) 1,622 1,759 8.40% 6,870 6,567 -4.40%
    Net profit margin (%) 13.60% 14.60% 0.90% 15.10% 14.90% -0.20%
    No. of shares (m)         42.05  
    Diluted earnings per share (Rs)*         157.29  
    Price to earnings ratio (x)*         34  
    *trailing twelve months
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