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Feb 22, 2013, 11.01 AM IST | Source: Moneycontrol.com

Angel Broking neutral on GlaxoSmithkline Consumer

Angel Broking has maintained a neutral rating on GlaxoSmithkline Consumer Healthcare (GSK Consumer) in its February 20, 2013 research report. The research firm expects the company's malted food drinks (MFD) division to continue to post double digit growth, aided by the company's efforts to strengthen its distribution network.

Angel Broking has maintained a neutral rating on GlaxoSmithkline Consumer Healthcare (GSK Consumer) in its February 20, 2013 research report. The research firm expects the company's malted food drinks (MFD) division to continue to post double digit growth, aided by the company's efforts to strengthen its distribution network.

"For 4QCY2012 GlaxoSmithkline Consumer Healthcare (GSK Consumer) posted a 17.9% yoy growth in net profit to Rs 70cr, aided by a 161bp yoy improvement in gross margin and a 46.6% yoy increase in auxiliary income. For 4QCY2012 GSK Consumer posted a 17.8% yoy growth in net sales, aided by an 8% volume growth. The top-line growth was reasonably strong despite lower offtake by the canteen stores department (CSD).

The company's sales volume has been impacted by low CSD offtake since the beginning of CY2012. Better pricing resulted in a 161bp yoy increase in gross margin, despite the increase in cost of raw materials such as wheat, sugar etc. However, OPM was down by 305bp yoy to 7.2%, due to the steep 37.1% yoy increase in other expenses to Rs 206cr. On a positive note, the company posted a 46.6% yoy increase in auxiliary income to Rs 25cr. The effective tax rate too was down by 658bp yoy resulting in a 17.9% yoy increase in net profit to Rs 70cr.

We expect the company's malted food drinks (MFD) division to continue to post double digit growth, aided by the company's efforts to strengthen its distribution network. The stock has run up steeply post the open offer announcement by the promoters. At the current market price, the stock is trading at 31.2x CY2013E EPS of Rs 123. We continue to remain Neutral on the stock," says Angel Broking research report.

Public holding more than 90% in Indian cos

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