GSK Consumer: Looking for rhythm - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

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

GSK Consumer: Looking for rhythm

Oct 25, 2004

Performance summary
GSK Consumer Healthcare has reported 3% revenue growth during the third quarter ended September 2004. The company margins have improved significantly, thereby resulting in a 37% bottomline growth during the quarter. For the nine months ended September 2004, GSK has reported almost 8% revenue and around 7% bottomline growth.

(Rs m)3QCY033QCY04Change9mCY039mCY04Change
Net sales 2,281 2,350 3.0%6,0746,5527.9%
Expenditure 1,986 1,928 -2.9%5,0485,4467.9%
Operating Profit (EBDITA) 295 422 43.2% 1,026 1,106 7.8%
EBDITA margin (%)12.9%17.9% 16.9%16.9% 
Other income 47 30 -36.1%149104-30.2%
Interest (1) (3)85.7%5-20-476.9%
Depreciation 87 90 4.2%269268-0.2%
Profit before Tax 257 364 42.0% 900 961 6.7%
Tax 87 138 58.4%30935414.6%
Extraordinary income/(expense) (5) - - (22) - -
Profit after Tax 165 226 37.3% 569 607 6.6%
Net profit margin (%)7.2%9.6% 9.4%9.3% 
No. of Shares (m)45.445.4 45.445.4 
Diluted Earnings per share (Rs)*14.519.9 16.717.8 
Price to earnings ratio (x)     14.1  
*(annualised), CY = Calendar Year      

What is the company’s business?
GSK Consumer dominates the Rs 13 bn Indian malted beverage market with a significant 65% share (volume terms). Its white beverage brand ‘Horlicks’ has led to the market growth of this sector in India and contributes around 80% to the company’s revenues. The company’s other brands include ‘Boost’, ‘Viva’ and ‘Maltova’. The company also earns 4-5% fees by marketing products for SmithKline Beecham Asia Pvt. Ltd, the parent’s 100% subsidiary. The subsidiary has well known brands like ‘Aquafresh’ in oral care segment, ‘Eno’ and ‘Crocin’ in OTC portfolio. It recently also took up marketing of ‘Iodex’ for GSK Pharma.

What has driven performance in 3QCY05?
Sales:  The company is still unable to find a rhythm in its revenue trend. It still seems to be struggling and is yet to stabilise. Its revenue trend has been very volatile over the last seven quarters (see chart). GSK Consumer has provided no indication of how the malted beverage segment is growing, but we believe that the segment growth has slowed from its earlier average of 10% plus rate over the past decade.

Operating margins:  One of the key reasons for the company reporting strong bottomline growth is the significant improvement in operating margins (up 5% YoY). This has come about as a result of a dip in advertising expenses as a percentage of sales, as well as its raw material costs. Also, the third quarter of last year was abnormally bad for the company, thus showing a higher base improvement this year. During the nine month period however, GSK's margins have remained stable.

Cost break-up
as a % of net sales3QCY033QCY049mCY039mCY04
Stock3.3%1.5%-0.9%1.0%
RM34.5%32.4%36.0%35.0%
Finished goods1.2%1.3%1.0%1.0%
Staff cost10.0%10.2%10.5%10.8%
Advertising14.4%12.5%11.5%11.0%
Other exps.22.1%23.0%23.3%23.2%
Patent and trademark1.1%0.5%1.2%0.5%
Def. Rev. exps.0.5%0.5%0.6%0.6%
Total87.1%82.1%83.1%83.1%

What to expect?
The management has declared a second interim dividend of Rs 3.7 per share, taking the total interim dividend for 2004 to Rs 7 per share. The stock is trading at Rs 252, reflecting a P/E of 14.1 times annualised 9mCY04 earnings and market cap to sales of 1.3x. GSK Consumer has no doubt made some progress in reversing the decline in topline over the past few quarters. However, market conditions continue to be difficult for this single product company. A full fledged recovery in the company's fortunes still seems some time away and therefore, we view the company cautiously.

Equitymaster requests your view! Post a comment on "GSK Consumer: Looking for rhythm". Click here!

  

More Views on News

GUJ. STATE PETRONET at 52 Week High; BSE 500 Index Down 0.1% (Market Updates)

Jun 16, 2021 | Updated on Jun 16, 2021

GUJ. STATE PETRONET share price has hit a 52-week high. It is presently trading at Rs 324. BSE 500 Index is down by 0.1% at 21,679. Within the BSE 500, GUJ. STATE PETRONET (up 0.8%) and GSK CONSUMER (up 5.1%) are among the top gainers, while top losers are DHFL and ADANI TOTAL GAS.

Varun Beverages Q1 Review: Net Profit Rises Two-Fold; Board Announces 1:2 Bonus Issue (Views On News)

May 4, 2021

Varun Beverages' two-fold jump in profit came on the back of strong volume growth and demand recovery.

Burger King IPO: Should You Subscribe to This QSR Chain Business? (IPO)

Dec 2, 2020

Does the company with one of the fastest-growing QSR chains in India have sound prospects?

GSK CONSUMER Announces Quarterly Results (3QFY20); Net Profit Up 25.1% (Quarterly Result Update)

Feb 7, 2020 | Updated on Feb 7, 2020

For the quarter ended December 2019, GSK CONSUMER has posted a net profit of Rs 3 bn (up 25.1% YoY). Sales on the other hand came in at Rs 12 bn (up 3.8% YoY). Read on for a complete analysis of GSK CONSUMER's quarterly results.

GSK CONSUMER Announces Quarterly Results (2QFY20); Net Profit Up 25.3% (Quarterly Result Update)

Nov 14, 2019 | Updated on Nov 14, 2019

For the quarter ended September 2019, GSK CONSUMER has posted a net profit of Rs 3 bn (up 25.3% YoY). Sales on the other hand came in at Rs 13 bn (up 5.7% YoY). Read on for a complete analysis of GSK CONSUMER's quarterly results.

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

My 'Unlock' Investments (Fast Profits Daily)

Jun 11, 2021

The best unlock investments you can make in the market.

The Most Visible Sign of India's Revival is on Two Wheels (Profit Hunter)

Jun 9, 2021

Investing in the best stocks could result in wealth compounding on a massive scale.

How I Discovered a 400-Year-Old Open Secret to Extreme Wealth (Profit Hunter)

Jun 11, 2021

Charlie Munger's open secret about investing success.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

GSK CONSUMER SHARE PRICE


Apr 15, 2020 (Close)

TRACK GSK CONSUMER

  • 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

GSK CONSUMER - RASOYA PROTEINS COMPARISON

COMPARE GSK CONSUMER WITH

MARKET STATS