Re: {LONGTERMINVESTORS} Research Reports extracts & summaries - Thread

 

[Kotak] GSK Consumers (Rs5,741; ADD): 2QFY17 first take - another subdued quarter as volumes likely decline again ·         Headline reported financials: (1) Net revenues declined 2% yoy to Rs10.23 bn, missing our estimate by 5%, (2) EBITDA was up 3% yoy to Rs2.45 bn, 6% below our estimate. We note that EBITDA margins expanded 88 bps yoy to 22.7% despite largely flat gross margins. This was on the back of sharp cuts in A&P spending (down 13% yoy in absolute terms) and strong control on other opex. The company indicated that it maintained its share of voice in the market, (3) recurring PAT of Rs1.84 bn, flat yoy, came in 9% lower than our estimate on account of the miss at the EBITDA level as well as marginally higher-than-estimated ETR. We note that the company did see some additional impact of excise duty increase during the quarter; gross sales decline was lower at 1% yoy.   ·         1HFY17 saw 4% net sales decline, 1% EBITDA growth and similar growth in recurring PAT. 1HFY17 EPS stood at Rs81.9.   ·         Company's earnings presentation did not carry any volume growth indicator, yet again. Gross sales decline of 2% yoy suggests that volumes may have declined in mid-single-digits. We do think that price-led-growth contribution likely came down this quarter as the company cut prices on the LUP pack (back to Rs5 from Rs6; another example of the price point challenge in the Indian market). Company indicated that it gained market share on both volumes (up 100 bps to 66.4%) as well as value (+60 bps to 58.3%). We welcome this fresh disclosure on market share numbers and hope the company continues to disclose these every quarter.   ·         Company indicated impact of one-off accounting adjustments sitting in the base quarter (130 bps on topline growth). Even adjusted for this, topline growth would not look much better and to that extent, we do not discuss adjusted numbers.   ·         Business auxiliary income grew 12% yoy to Rs572 mn, improvement from 1QFY17 but subdued nonetheless.

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