Buy GSK Consumer; target Rs 2965: Firstcall Research

“GlaxoSmithKline Consumer Healthcare Limited engages in the manufacture and sale of nutritional foods and over the counter drugs primarily in India. During the quarter, the company’s sales have phenomenal raised with the rise volume and also quarter under margins pressure. GlaxoSmithkline Consumer Healthcare Ltd has recommended a Dividend at the rate of Rs. 35/- per equity share of Rs. 10 each. Company has 85 manufacturing sites in 37 countries, over 16000 R&D. Net Sales and PAT of the company are expected to grow at a CAGR of 15% and 16% over 2010 to 2013E respectively.”

“The company disclosed a phenomenon rise in standalone net sales for the quarter ended Dec 2011. During the quarter, the profit of the company surged 10.74% to Rs 591.00 million from Rs 533.70 million in the same quarter previous year. Net sales for the quarter for the quarter rose 19.19% to Rs 6247.90 million from Rs 5241.90 million, when compared with the prior year period. It reported earnings of Rs 14.05 a share during the quarter, registering 10.74% increase over previous year period.”

“At the current market price of Rs.2623.65, the stock is trading at 26.97 x CY12E and 23.29 x CY13E respectively. Earning per share (EPS) of the company for the earnings for CY12E and CY13E is seen at Rs.97.28 and Rs.112.63 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 15% and 16% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 16.38 x for CY12E and 14.23 x for CY13E. Price to Book Value of the stock is expected to be at 6.40 x and 5.02 x respectively for CY12E and CY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 2965 for Long term investment,” says Firstcall Research report.

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