Buy GSK Consumer; target of Rs 8000: ICICI Direct

ICICI Direct's research report on GSK Consumer

Strong volume growth of 13.7% led to 14.4% increase in Q2FY19 sales to Rs 1,272 crore. Export revenues swelled by 74% on account of addition of Malaysia in the export market. The domestic business grew 10.8% on account of domestic volume growth of 8.7% Auxiliary income increased 20% YoY on the back of an improvement in OTC products and oral care portfolio performance. Volume market share of Horlicks was 49.5% with value market share of 43.3%. On the other hand, volume market share of Boost was 13.9% with value market share of 10.9% Benefitted by low input costs, especially milk prices, EBITDA margins surged 451 bps to 27.8% primarily driven by a 510 bps increase in gross margins, partly offset by higher employee expenses & other overheads during the quarter. With higher operating profit and other income, PAT for the quarter increased 43.2% YoY to Rs 275.5 crore.

Outlook

We reiterate our BUY recommendation on the stock with a revised target price of Rs 8,000/share, 36x FY20E earnings.