With a 70% market share in the Rs2.4 billion malted beverages market, GSK Consumer is in a sweet spot.
GSK’s malted foods sales clocked 14% volume growth in CY08. As per our estimates, the company is set for 8% growth in CY09E.
This, combined with the 5.5% price hike already undertaken by the company, should enable it to clock at least 14% top line growth and 16.5% earnings growth in CY09E.
At Rs598, the stock trades at 11.5x our CY09E EPS of Rs52.1; close to its historical low of 9.5x. We recommend BUY with a DCF based price target of Rs710.
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