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Indian Shaving: Not so smooth… - Views on News from Equitymaster
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  • Dec 29, 2000

    Indian Shaving: Not so smooth…

    Indian Shaving Products Limited (ISPL), the Indian arm of Gillette, is a significant player in the Rs 5 bn Indian shaving blade market. It has over 40% market share (in value terms) in the shaving products business. Its products are marketed under two main umbrella brands; 7 'O Clock and Gillette. Since ISPL’s financial year ends in December 2000, it’s a good time to revisit the company.

    (Rs m) 9mFY00 9mFY01 Change
    Net Sales 1,648 2,081 26.3%
    Other Income 28 105 269.6%
    Expenditure 1,368 1,826 33.5%
    Operating Profit (EBDIT) 281 256 -8.9%
    Operating Profit Margin (%) 17.0% 12.3%  
    Interest 29 49 69.0%
    Depreciation 79 85 7.6%
    Profit before Tax 201 227 12.6%
    Tax 68 82 20.3%
    Profit after Tax/(Loss) 133 145 8.6%
    Net profit margin (%) 8.1% 7.0%  
    No. of Shares (eoy) 12.9 12.9  
    Earnings per share* 13.8 15.0  
    Current P/e ratio   46.3  

    On a nine month consolidated basis, the company's performance was not too encouraging. Though the company's turnover saw a 26% jump in turnover during the period, its bottomline grew by a staid 9%. This is largely as a result of a significant jump in ISPL's expenditure. It’s advertising and sales promotion expenses shot up by 80% during the nine-month period to Rs 259 m. Overall it’s expenditure surged 34%. The company's interest outgo also saw a 69% jump.

    Its amalgamation with Duracell India and Wilkinson Swords will start showing affect in the fourth quarter ended December 2000. Though these amalgamations (especially with Wilkinson) will help ISPL make inroads into the lower segment of the market, the bottomline and profit margins will remain depressed since both the amalgamated companies are making meager profits.

    At the current price of Rs 694, ISPL's stock trades at a P/e multiple of 46 times its FY01 annualised earnings. The company's stock traditionally has traded between 60 to 70 times its earnings. Going by its difficult short-term outlook, the stock is unlikely to show much re-rating. On the longer-term horizon, the company's brand name, introduction of new products and business presence augur well for the investors.



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