Capital Market: GlaxoSmithKline Consumer Healthcare (GSK)
GSK, one of the largest players in the Malted Food Drink Industry, has reported encouraging results for Q4 CY2008. Net Sales grew @ 17.1% to Rs.333.3 crore (Rs.284.8 crore). OPM% was subdued at 13.6% (14.6%). A higher sales coupled with higher Other income of Rs.24.2 crore (Rs.17.1 crore) led to 23.1% growth in PBT to Rs.50.7 crore (Rs.41.2 crore) and 18.3% growth in PAT to Rs.32.58 crore (Rs.27.51 crore).
For CY2008, Net Sales were up to 20.7% to Rs.1542.8 crore (Rs.1278.5 crore). OPM % declined to 17.4% (19.5%) as a result of higher raw material prices (especially during first 3 quarters due to high commodity prices). Higher sales coupled with higher Other income of Rs.95.5 crore (Rs.68.5 crore) led to 15.9% growth in PBT to Rs.284.1 crore (Rs.245.1 crore) and 15.8% rise in PAT to Rs.188.3 crore (Rs.162.7 crore).
GSK enjoys a market share of 70% in domestic malted beverage segment with its brand portfolio of Horlicks, Boost, Viva, Maltova etc., which are well established. Company has launched new variants which are exclusive for certain categories. GSK aims to extend its health drink into a complete family health drink brand with variants suiting every member of the family. With this in view, GSK has launched Women’s Horlicks, Horlicks Extra Light and flavoured drinks which has been well received. It has also made its foray into the fast growing protein segment by launching Actibase, a protein health drink.
Company’s increased spending on brand building and launch opportunities from its parent’s portfolio holds promise for good growth. GSK has got aggressive plans to launch new products in its existing category as well as completely different categories such as energy drinks, vitamin drinks, snore relief products etc. from its parent’s brand portfolio over the next 3-4 years.
Moreover, it will also be launching new product for the bottom of the pyramid by end of CY2009, targeting mainly the rural population.
Company, which is now operating at 75% capacity utilization is planning to expand to 90% by end of CY2009. It also plans to add capacities over the next 3 years.
GSK is a cash rich company. At CMP of Rs.587/-, the share is trading at 13.1 times CY2008 EPS of Rs. 44.8 and 11.2 times CY2009 expected EPS of Rs. 52.4. It is a safe investment bet. In view of its promising future outlook, we recommend to "BUY" the share at CMP.