Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 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.
SBCH: Opportunity in adversity - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Sep 24, 2002

    SBCH: Opportunity in adversity

    Malted beverage major, GlaxoSmithKline Consumer Healthcare (SBCH), has seen its stock price crash to new lows. The counter has seen an over 30% decline in the last 5 months. The pessimism has come about ever since the company declared a huge 26% drop in June quarter topline and 45% decline in bottomline.

    Not many in the analyst community could foresee this reversal in fortunes. After all, SBCH is in a business, which has been for long considered a staple diet for a large part of urban India. Even in the difficult market conditions of FY02, the company managed to log in a 14% topline and over 16% bottomline growth. Not many in the FMCG spectrum managed to do that.

    Product Profile
    Product Brands Market size
    (Rs bn)
    % share Competition
    Horlicks, Boost,
    Maltova, Viva
    13 over 65% Cadbury's Bournvita, Nestle's Milo,
    Amul's Nutramul, Hienz's Complan

    That said, the past 3 quarters gave enough indications that the slowdown is finally catching up with this malted beverage major. The topline growth for December (8% growth), March (0.4%) and June quarter (-26%) does indicate the declining trend. However, it does not seem possible that the company’s products (Horlicks, Boost), which have been for decades considered staple diet, suddenly see such a significant degrowth. For that the competition must have had applied tremendous marketing pull, as well as the consumers themselves may have seen a massive shift in consumption habits.

    But the shift in habits is steady and not overnight. So in all likelihood, the huge dip in topline seems like an inventory pipeline correction. While one cannot overlook the impact of slowdown on the topline, a significant portion of the dip seems a result of the aforesaid correction. SBCH is also suffering due to higher depreciation charges. A delay in stabilising the new plant has also affected the cost saving advantage.

    Past record…
    (Rs m) 1990 2001 CAGR
    Sales 1,254 9,924 20.7%
    Net Profit 172 1,267 19.9%
    OPM 17.1% 21.0% -
    NPM 13.7% 12.8% -

    The stock currently trades at 5-year lows of Rs 272, implying a P/E of 10x FY03E expected earnings. While in the near term, the company may be in a spot of bother, but these valuations are worth getting into a business that has for long shown resilience and steady growth. Also, the management has indicated that the inventory correction is almost over.



    Equitymaster requests your view! Post a comment on "SBCH: Opportunity in adversity". Click here!


    More Views on News

    GSK Consumer: On the Recovery Path (Quarterly Results Update - Detailed)

    Jun 20, 2017

    While GSK consumer reported muted revenue growth, volumes are seen to be recovering.

    GSK Consumer: Price Hike Hurts Volumes (Quarterly Results Update - Detailed)

    Nov 30, 2016

    GSK Consumer Healthcare declared results for the quarter ended September 2016. The revenues dropped by 1.3% during the quarter as compared to a year ago; while the profits declined by 16.6% YoY during the quarter.

    GSK Consumer: Slowdown in demand impacts sales (Quarterly Results Update - Detailed)

    Oct 5, 2016

    GSK Consumer Healthcare has announced the first quarter results of the financial year 2016-2017 (1QFY17). The company's sales declined by 1.4% YoY while net profit rose by 2.9% YoY during the quarter.

    GSK Consumer: A Forgetful Year (Quarterly Results Update - Detailed)

    Jun 1, 2016

    GSK Consumer Healthcare announced its results for the quarter and year ended March 2016. During the quarter, sales and profit came in lower by 9% YoY and 8% YoY respectively.

    GSK Consumer: Feeling the Growth Pressures? (Quarterly Results Update - Detailed)

    Feb 15, 2016

    GSK Consumer Healthcare announced its results for the quarter ended December 2015. While revenues were up by 2% YoY, profits were higher by 37% YoY.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 17, 2017 (Close)


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


    Detailed Financial Information With Charts