Angel maintains 'Neutral' rating on HDFC, Ranbaxy, GCPL

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26 Aug, 2025 12:21

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Brokerage house Angel Broking has come out with its research report on Housing Development Finance Corporation (HDFC), Ranbaxy Laboratories and Godrej Consumer Products (GCPL).

Housing Development Finance Corporation (HDFC)
At the current market price, HDFC’s core business (after adjusting Rs 271/share towards the value of its subsidiaries) is trading at 4.1x FY2015E ABV. We expect HDFC to post a healthy PAT CAGR of 17.9 percent over FY2013–15E. However, considering that the stock is currently trading at 4.1x FY2015E ABV and at around 59 percent premium to the Sensex in P/E terms (compared to an average of 39.4 percent since FY2006). We consider the stock to be fairly valued and hence, recommend a Neutral rating on the stock.

Ranbaxy Laboratories
Ranbaxy reported net sales of Rs 2,440cr, down 34.2 percent yoy, and below our estimate of Rs 2,850cr. The gross margin declined by 14.0 percent to 63.2 percent, which aided the OPM to come in at 4.0 percent (including the forex losses), much lower than 24.9 percent in 1QCY2012. This was lower than our expectation of 10.0 percent for the quarter. This aided the adjusted net loss to be at Rs 46cr. The stock is trading at an attractive valuations of EV/sales of 1.3x CY2014E. While the valuation is very attractive in comparison to its peers, given the low profitability in the core business and uncertainty on the USFDA front, we maintain our Neutral rating on the stock.

Godrej Consumer Products (GCPL)
On the domestic front Home care, Soaps and Hair Care segments posted a top-line growth of 26 percent yoy, 17 percent yoy and 27 percent yoy respectively. The company continued to gain market share and enjoy leadership across all formats of electrics, coils and aerosols. Indonesian and African businesses posted a top-line growth of 35 percent and 38 percent yoy, respectively. The OPM fell by 271bp yoy to 16.0 percent, due to the steep 48 percent yoy increase in A&P expenses. A&P expenses as a percentage of sales went up by 120bp on a yoy basis. The fall in OPM was also to an extent due to the steep 1,290bp decline in the margins of African business on a high base. Closure of business in Kenya due to elections (OPM impact of 500bp) and liquidation of stocks at discounted prices in Kinky’s hair extension business (OPM impact of 200bp) resulted in a fall in margins of the African business. Recurring profit rose by 22.4 percent yoy to Rs 205cr, aided by higher sales. The company also had exceptional income of Rs 128cr during the quarter pertaining to divestment of non-core foods business and associated brands by its overseas subsidiary. At the current market price, the stock is trading at 28.3x FY2015E consolidated earnings. After valuing the company’s various international subsidiaries and giving effect to their varied geographic presence, we believe the current implied valuation of the domestic business is at fair levels. We maintain our Neutral rating on the stock," says Angel Broking research report.

Also read: See Sensex beyond 21000 by year-end: Angel Broking

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