X

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.
Godrej Consumer: The 'glow' is missing - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 22, 2001

    Godrej Consumer: The 'glow' is missing

    Godrej Consumer Products Limited (GCPL) has declared its second quarter results quite recently. Let's take a look at what this relatively new baby has to show for itself.

    (Rs m) 1QFY02 2QFY02 1HFY02
    Sales 1,404 1,126 2,529
    Other operating income 26 69 95
    Total operating income 1,430 1,195 2,625
    Other Income 1 5 6
    Expenditure 1,255 1,008 2,263
    Operating Profit (EBDIT) 175 186 362
    Operating Profit Margin (%) 12.5% 16.5% 14.3%
    Interest (net) 15 11 25
    Depreciation 23 23 46
    Profit before Tax 138 157 296
    Tax (including deffered tax) 46 51 97
    Profit after Tax 92 107 198
    Net profit margin (%) 6.5% 9.5% 7.8%
    Effective tax rate (%) 33.6% 32.3% 32.9%
    No. of Shares (eoy) (m) 59.8 59.8 59.8
    Diluted earnings per share* 6.1 7.1 6.6
    P/E ratio 8.6 7.4 8.0
    (* annualised)      

    GCPL is a result of the demerger of the consumer products division of the former Godrej Soaps Limited. The company is a major player in the Indian FMCG market with presence in the personal, hair, household and fabric care categories. It has leading brands such as 'Cinthol', 'Fairglow', 'Allcare', 'Nikhar', 'Godrej No.1', and Shikakai in the soaps category. Its brands in other product categories include Godrej Fairglow fairness cream, Godrej shaving cream & hair dyes, Colour Soft hair colour, Colour Gloss shampoo and Ezee liquid detergent.

    GCPL's second quarter performance is nothing to write home about. According to the company's press release, GCPL has logged a marginal 3% turnover growth YoY during the quarter. This is poor as compared to a 35% growth YoY in the first quarter. However, it must be said here that in the first quarter, GCPL had a large contribution from contract manufacturing during 1QFY02. The management had warned at the time that it is unlikely to continue.

    Cost break-up
    (Rs m) 2QFY02 % of sales 1HFY02 % of sales
    Material 463 41.1% 1114 44.0%
    Excise duty 140 12.4% 301 11.9%
    Staff 48 4.3% 93 3.7%
    Advertising & promotion 159 14.1% 363 14.3%
    Others 198 17.6% 392 15.5%

    The company's management has not released last year's profit figures as they say it is very difficult to find the segregated numbers. As such, the bottomline growth in anybody's guess. Though the company's operating margins have improved, this is because of higher other operational income like sale of by products and processing fees for contract manufacturing. If we exclude this income then operating margins have declined by 20 basis points quarter on quarter (as compared to 1QFY02) to 10.4%. This other operational income has also improved GCPL's net margins, otherwise the net margins have actually fallen.

    Sales mix
    (Rs m) 2QFY01 2QFY02 Change 1HFY01 1HFY02 Change
    Soaps 617 662 7.3% 1,157 1,326 14.6%
    Hair colour 214 247 15.6% 433 526 21.5%
    Toileteries 111 89 -19.2% 177 192 9.0%
    Liquid detergents 20 23 17.3% 28 26 -4.5%
    Total Godrej Brands 961 1,022 6.3% 1,794 2,071 15.4%
    Contract manfacturing 131 104 -20.7% 337 459 36.2%
    Total Sales 1,092 1,126 3.1% 2,131 2,530 18.7%

    On a half yearly basis, the company's turnover YoY has improved by 19%. But this is largely the 1QFY02 contract manufacturing numbers. Going by the numbers in 2QFY02 it becomes evident that the company has been facing pressure in the market. However, its market share data is heartening to see. In toilet soaps GCPL's share has improved to 5.7% in August 2001 as per ORG data (5.4% in August 2000), hair colours share has gone up to 43.9% in August 2001 from 40.1% in August 2000 and liquid detergents too, has seen an improvement.

    Market share
      Aug'00 Aug'01
    Toilet soaps 5.4% 5.7%
    Hair colour 40.1% 43.9%
    Liquid detergent 58.0% 68.1%
    Shaving cream 11.4% 10.5%
    Fairness cream 1.1% 3.4%
    Talcum powder 2.1% 1.5%
    Source: Godrej financial presentation, ORG Data

    Notwithstanding the lacklustre 2QFY02 financial performance, the Godrej group looks more focused on its FMCG business than in the past. The company's debt restructuring continued in 2QFY02. It repaid Rs 98 m debt during the quarter. All in all, GCPL's debt has come down by Rs 442 m since April 2001. Its current outstanding debt stands at Rs 253 m. As a result, the company's interest burden has declined by 28% in 2QFY02, as compared to 1QFY02.

    The company declared Rs 2 per share interim dividend during the quarter and has also indicated that it may buyback shares of the company at a maximum price of Rs 100 per share, with a maximum outlay of Rs 100 m.

    On the operational front, the company still has to perk up its consistency. However, the company's restructuring measures are giving the company a much needed focus. These are also changing the perception about the company's management and if this continues this would add to the company's shareholder wealth.

    At the current price of Rs 53 the stock trades at a P/E of 8x its 1HFY02 annualised earnings. These valuations are among the lowest in the FMCG circle. The management's past performance continues to cast a shadow on the valuations. However, if the company can maintain the restructuring initiatives and improve its operational consistency then the valuations would definitely see an upswing. The proposed buyback offer could also be a short term trigger.

     

     

    Equitymaster requests your view! Post a comment on "Godrej Consumer: The 'glow' is missing". Click here!

      
     

    More Views on News

    Marico: Earnings Hit by Lower Volumes and Firming Input Prices (Quarterly Results Update - Detailed)

    Aug 9, 2017

    While GST implementation brought down volumes and profitability in the short run, Marico remains optimistic in the long run.

    More Views on News

    Most Popular

    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.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    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.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    More
    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

    GODREJ CONSUMER SHARE PRICE


    Aug 21, 2017 03:37 PM

    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 - GODREJ INDUSTRIES COMPARISON

    Compare Company With Charts

    COMPARE GODREJ CONSUMER WITH

    MARKET STATS