GSK Consumer Healthcare has posted highest growth in revenues since September’03 quarter and highest operating and net profit margins in past 7 calendar years.
31% growth in revenues driven by robust performance across categories and brands and 48% growth in profits on account of better realization, higher other income, lower ad-spend and lower other expenses are the salient features of March’09 quarter results.
Robust performance is seen across the categories and brands and in both volume and realization terms.
Besides strong domestic demand, increased sourcing from India has led to robust volume offtake for the MFD.
Tapping the fast growing healthy nutrition segment by leveraging on the brand equity of Horlicks through new product and category launches would reduce dependence on single brand and product and inturn improve valuation on the bourses.
We revise our estimates for CY09 and CY10 taking into considering GSKCH’s robust performance much above our and market expectation, bright outlook for consumer sector as well as expected improvement in economic scenario post Q2FY10.
At current price of Rs836, the scrip is trading at 13.5x CY09E Earnings of Rs61.7 and 11.7x CY10E Earnings of Rs71.5.
The stock has achieved our previous target price of Rs800 and hence we change our recommendation from Buy to OUTPERFORM with a revised target price of Rs946 based on our changed estimates for CY09 and CY10.