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Henkel: Good 2QFY02 show

Jul 17, 2001

Henkel Spic India has made a comeback in the second quarter of FY02. Post the dismal results recorded in the first quarter, an 80% jump in 2QFY02 does sound good. The company also recorded an encouraging 11% YoY growth in net sales during this quarter.

(Rs m) 2QFY01 2QFY02 Change 1HFY01 1HFY02 Change
Net Sales 831 919 10.6% 1,581 1,685 6.6%
Other Income 1 0   6 1 -82.8%
Expenditure 800 867 8.5% 1,523 1,606 5.5%
Operating Profit (EBDIT) 31 51 66.9% 58 78 35.6%
Operating Profit Margin (%) 3.7% 5.6%   3.7% 4.7%  
Interest 6 16 171.7% 17 28 66.5%
Depreciation 14 13 -5.0% 27 26 -2.6%
Profit before Tax 12 22 79.5% 20 25 23.3%
Tax 0 0   0 0  
Profit after Tax/(Loss) 12 22 79.5% 20 25 23.3%
Net profit margin (%) 1.5% 2.4%   1.3% 1.5%  
No. of Shares (eoy) (m) 116.4 116.4   116.4 116.4  
Diluted Earnings per share* 0.4 0.8   0.3 0.4  
Current P/e ratio   30.4     53.4  

Henkel Spic is a 54% subsidiary of German consumer products major, Henkel KgaA, engaged in the manufacture of eco-friendly zeolite-based phosphate free detergents, both surface cleaners and laundry based products. The company also has a presence in oral care and cosmetics segment. Tamilnadu Petroproducts is the other promoter. The company owns brands like Brisk, Henko, Limeshot, Pril, Mr. White, Margo, Neem toothpaste, Fa and Aramusk.

On a consolidated basis, the company has ended the first half of FY02 with a 7% growth in topline and a 23% growth in bottomline. Henkel's 2% growth in topline and a 75% decline in net profit during 1QFY02 has deflated the overall 1HFY02 performance.

To expand the company has taken on debt, which has resulted in a huge increase in the interest burden. Otherwise, the second quarter performance seemed very encouraging considering the company's double digit topline growth.

The company's valuations had taken a huge hit post it first quarter performance. If we annualise Henkel's 2QFY02 earnings, then at the current price of Rs 23 the stock trades at a P/e multiple of 30 times. Even this seems on the higher side. But considering the company's small base and its potential to grow, the stock may remain range bound in the medium term.

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