Good performance; maintain Buy. GCPL witnessed a strong 1QFY11, with net profit growing 24% yoy. Increase in market share of key segments in India and consolidation of acquired subsidiaries are expected to drive growth in the next few quarters. We retain our Buy rating with target price of Rs405/share. n Acquisitions driving growth. With consolidation of various subsidiaries, revenues have grown 49% yoy. The domestic business has, however, registered a 7% drop in revenues. With the acquisitions, the international business now accounts for 29% of sales. n Market share gain in key segments. GCPL has gained market share in key segments in India - up 60bps yoy and 160bps yoy in soaps and household insecticides respectively. However, it lost market share of 40bps in hair colors. n Lower EBITDA margin. With higher palm oil prices, EBITDA margin is down 120bps. We, however, expect the margin to move up with rising share of international business, which enjoys higher margins. With higher MAT rates, net profit is up only 24%. n Valuation. We retain our Buy rating on GCPL, at target price of Rs405/share based on target PE of 25x on FY12e earnings. Our target PE is at 65% premium to 12-month forward Nifty PE. We expect the premium to expand, given higher market share and acquisition synergies. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
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