Dec 28, 2010|
FMCG: Best and the worst
As 2010 draws to a close, we decided to take a look at the best and the worst performing stock in the consumer goods space.
Best Performer: GSK Consumer (up 66% YoY)
GSK Consumer had an eventful 2010. The maker of Horlicks and Boost tried its hands at new products with some success. The company’s biscuits under the Horlicks brand continue to perform well. At the same time, its newly launched noodles under the brand name "Foodles" gained 4% market share in the east India markets in addition to 5% in south India markets. The top line of GSK in the first 9 months grew by 19.3% YoY on strong volume growth. In spite of food inflation, the company was able to control its costs and invest behind brand building. Due to heavy spending on advertisement, the company’s operating margins fell by 70 basis points and stood at 20% (as a percentage of sales). However, as a result of higher other income and lower interest costs due to better management of its creditors, the company was able to grow its bottom line by 24% YoY.
The company is in a sweet spot. Its core products are in an under penetrated category while it is using its already established brands to launch new products. Furthermore, the company is able to manage its working capital in a much better manner. This has given the company surplus cash. Going forward, the company is expected to continue to perform well on the back of its health platform.
Worst performer: Procter & Gamble Hygiene & Health Care (up 1% YoY)
Procter & Gamble Hygiene & Health Care or PGHH had a lacklustre year. The maker of Vicks and Whisper sanitary napkins had to take price cuts and face the burden of excise duty levied on sanitary napkins during the year. As a result, the top line of the company over the first 9 months grew by 8% YoY. This was mainly on the back of volumes. The company also had to face rising raw material costs which put pressure on its margins. Besides higher raw material costs, the company faced margin pressure due to increase in advertisement spending. As a result, the company’s operating profit fell by 40% YoY. The company during the year shifted some of its manufacturing to tax exempt zone. As a result, its effective tax rate fell sharply. Due to this fall in effective tax rate, the company’s bottom line (down 36% YoY) did not fall as much as it’s operating profit.
PGHH is in a sweet spot as the market for sanitary napkins is under penetrated and fast growing. Due to the excise duty levy, the company’s business was shaken resulting in a dismal performance. However, once the base effect is neutralised, the company is expected to grow in high double digits with margins returning to their historical levels.
More Views on News
Jun 20, 2017
While GSK consumer reported muted revenue growth, volumes are seen to be recovering.
Feb 8, 2017
ITC Ltd has announced third quarter results of the financial year 2016-2017 (3QFY17). The company has reported 4.7% YoY and 5.7% YoY growth in revenues and net profits respectively. Here is our analysis of the results.
Dec 7, 2016
ITC has announced second quarter results of the financial year 2016-2017 (2QFY17). The company has reported 8% YoY and 10.5% YoY growth in revenues and net profits respectively.
Jun 8, 2016
ITC declared results for the quarter and year ended March 2016. During the year, the company's net revenues and profits rise by 1% YoY and 3% YoY respectively.
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.
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
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: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407