Hold Glaxosmithkline Consumer Healthcare; target of Rs 5657: Edelweiss

Edelweiss' research report on Glaxosmithkline Consumer Healthcare

GSK Consumer’s (GSK) Q4FY17 overall revenue (up 2.3% YoY) was slightly ahead of our estimate, while EBITDA and PAT, up 1.5% and 8.4% YoY came in line. Domestic health food drinks (HFD) dipped 1-2% YoY. GSK lost market share (MS) in Horlicks—value MS of 44.8% (Q3FY17: 46.5%) and volume MS of 50.6% (Q3FY17: 52.3%) reflecting heightened competition from current as well as new players like Patanjali Powervita, Sri Sri Ojasvita, Hershey’s syrup and Pediasure.

Outlook

Introduction of sachets to deepen HFD penetration (40% in South) will buoy GSK’s growth. However, lack of presence in the RTD segment is not a right strategy. Intense competition and NPD funnel remain key concerns. At CMP, the stock is trading at 27.8x FY19E. We maintain ‘HOLD/SU’ with target price of INR 5,657.