Emkay's research report on GSK Consumer
In Q4FY16, GSK Consumer's results was below our expectations on all counts. Key highlights: 1) Revenues at Rs 11.1bn, declined 8.8% yoy, while underlying sales growth was 1.5%. Excise impact was 550bps and 560bps was due to accounting adjustment in base year. Volume was flat vs our estimate of 5%. Auxiliary income grew 10.4% yoy. 2) EBITDA declined 11.2% yoy to Rs 1.6bn, but adjusting for one-off expenses, growth was 2.2%. Gross margin at 67.2%, up 100bps yoy, but high ad spends stemmed EBITDA margin to 17%, -140bps. 3) APAT down 13% yoy to Rs 1.8bn.
We have cut our revenue and earnings estimates by 6%/7% and 3%/5% respectively on account of weak sales. However, actions taken by the company to revive consumption and category growth along with likely uptick in urban and rural demand should improve volume profile in FY17. It remains among the cheapest consumer names in its league; volume revival will trigger valuation upside. We maintain Accumulate with revised target of Rs 6,200 (28x FY18 EPS).
For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Read More
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
