Professional Documents
Culture Documents
Bonanza
Analyst
Harsh Gupta
harsh.gupta@bonanzaonline.com
Tel: +91-22-3083950
FMCG SECTOR
Lower commodity prices coupled with
increased affordability to boost prospects
FMCG SECTOR
CONTENTS
SECTOR
Introduction to FMCG
(3-22)
4
11
14
16
Pick-up in economic growth with higher per capita income will be a fillip
for the sector
17
18
Valuation Parameters
19
19
Coverage Summary
20
COMPANIES
(23-72)
23
35
51
61
Institutional Research
India Research
6 April 2015
FMCG SECTOR
Thematic Report
Current Price:
INR 881
Target Price:
INR 1,000
Expected Upside
14%
52 Week High/Low
981/ 550
1,636
INR 2,185
Target Price:
INR 2,600
Expected Upside
19%
52 Week High/Low
2,250/ 821
186
INR 1,073
Target Price:
INR 1,480
Expected Upside
38%
52 Week High/Low
1,227/ 740
Avg. 6 Month
186
INR 273
Target Price:
INR 325
Expected Upside
19%
52 Week High/Low
315/171
Avg. 6 Month
250
HUL
Dabur
GCPL
Britannia
JLL
1,305,512
313,102
289,900
101,139
37,653
Diluted EPS
17.9
3.8
22.3
30.8
5.9
P/E
33.7
46.6
38.1
27.3
35.4
EV/EBITDA
25.1
33.2
25.0
15.9
19.0
ROE
131.8
40.7
23.1
49.3
13.7
13.0
13.6
10.4
5.7
8.1
Stock Performance
HUL
BIL
1M
3M
6M
1Y
-5%
13%
16%
44%
3%
21%
55%
161%
GCPL
-8%
10%
6%
28%
JLL
-2%
5%
12%
32%
CNX FMCG
-6%
-1%
0%
9%
CNX Nifty
-5%
3%
7%
27%
Analyst
Harsh Gupta
harsh.gupta@bonanzaonline.com
Tel: 91 22 3086 3950
FMCG SECTOR
1876.8
1880.1
1858.7
1710.9
1500
100.0
2228.9
92.2
80.2
1974.4
80.0
70.0
60.0
69.7
60.6
1365.4
52.7
50.0
45.0
1000
30.2
40.0
36.8
34.8
90.0
30.0
CAGR - 15%
500
20.0
10.0
0.0
0
2010
2011
2012
2013
2014
2015E
2016E
2017E
2018E
60
52
46
50
40
35
40
30
20
33
30
17
15
20
24
28
10
0
2013
2014E
2015E
2016E
2017E
2018E
Institutional Research
FMCG SECTOR
Tata Global
Beverages Ltd.
Emami Ltd.
United Breweries
Ltd
Britannia
P&G
Marico Ltd.
ITC Ltd.
Colgate Palmolive
Godrej Consumer
Products Ltd.
Jubilant foods
Dabur
Mcleod Russel
HUL
300,000
250,000
200,000
150,000
100,000
50,000
-
Refer to Exhibit 3; HUL and ITC are the major contributors in the FMCG sector. ITC is a
diversified player in Hospitality and Tobacco business with other FMCG products which
contributes approximately 60% and 2% respectively to its total sales and rest part is into
other FMCG products. Dabur, Colgate Palmolive, Godrej Consumer, United Spirits and
Nestle are other major contributors to the Indian FMCG sector registering total revenues
of more than Rs 3000 Cr.
HUL
Market cap.
P/E( x)
EV/EBITDA(x)
ROE (%)
Rs Cr
FY13
FY14
FY13
FY14
FY13
FY14
FY13
FY14
130,551
18
18
27
34
21
25
124
132
Dabur
31,310
40
47
29
33
45
41
Britannia
10,116
20
31
27
27
15
16
40
49
GCPL
28,992
15
17
52
51
39
37
19
20
3,765
61
35
19
19
14
Jyothy Labs
Institutional Research
FMCG SECTOR
Sector Classification
Exhibit 5: FMCG classification into segments and sub segments
FMCG
Sector
Personal Care
Household
Care
Food &
Beverages
Fabric Wash,
Household Cleaners,
Aerosols, Etc.
Health Beverages,
Staples, Cereals, Dairy
Products, Soft Drinks,
Snacks, Etc.
Institutional Research
FMCG SECTOR
HUL
P&G
Dabur
Cavin Care
12%
Others
23%
Source: IBEF
The Indian personal care industry is estimated at INR~850bn. The industry is divided into
personal wash, hair care, oral care, skin care, cosmetics, mens toiletries and fragrances.
Most segments of this industry face challenges through a decline in lower sales due to
lower volumes as well as lower realization. The next phase of growth has to come from
the rural market as the urban markets are near saturation levels in terms of penetration.
The industry has a low entry barrier and competition is severe. Besides the large
multinational players, there are some leading domestic players as well as the huge
unorganized players. Though most of the market share is with the larger players,
companies vie for the marginal market share. Cheaper imports and duplicate products
are also affecting the major players. Companies have been adopting promotion schemes
to dole out freebies and repackaging products in smaller packages to cater to a wider
consumer base are some recent trends.
The way ahead for the personal care companies is to introduce new and better product,
improve penetration, and make the consumer trade-up in price and quality. Rural
marketing will be a major thrust area for all companies. Under Personal care segment,
HUL is an obvious leader in hair care shampoo segment with a market share of 46%
followed by P&G and Dabur. Sunsilk and Clinic Plus are the most popular brands of HUL
followed by Head & Shoulders of P&G.
46%
Cooling Oils
Others
Source: IBEF
Institutional Research
FMCG SECTOR
Hair care - Oils
The hair oil market is valued at INR 6 bn growing at an impressive 6-7% in volume terms
despite the high penetration level. There are two types hair oil available in the market;
coconut oil and non greasy perfumed oil. Coconut oil comprises approximately 46% the
total market leading by Maricos Parachute Coconut Oil and the balance comprises the
non greasy perfumed oil. Usage of hair oil is an everyday habit with 50% of the
population out of which some perceive that massaging the head with hair oil has a
cooling impact. Penetration in hair oil segment is moderately high at ~87% and uniformly
distributed among the urban and rural areas.
Hair Care Shampoos
Shampoos market in India is valued at INR 4.5 bn with penetration level at 13% only.
The market is expected to heat-up due to lower duties and aggressive marketing and
promotion strategies employed by the players. Shampoo available in sachet has
constructed an image of affordability, comprising of ~40% of the total shampoo sale. The
Indian shampoo market is characterised by a twin-benefit platform: cosmetic and antidandruff. It is basically an upper middle class product, as more than 50% of the
consumers use ordinary toilet soap for washing hair. While the awareness level is high,
the penetration level is very low at about 30% in the metros. Urban markets account for
80% of the total shampoo market. The penetration level is rapidly increasing due to
decline in excise duty, which was 120% in 1993 to 30% currently.
Oral Care
The oral care market can be segregated into toothpaste (60%), toothpowder (23%) and
toothbrushes (17%). While 60% of toothpaste is sold on the family platform, around 35%
is sold on cosmetic propositions. On the other hand, while toothpowder accounts for 52%
of the market, red toothpowder accounts for 40% and black toothpowder accounts 8%.
The penetration level of toothpastes/powder in urban areas is 3 times that in the rural
areas. Traditional materials such as neem and tobacco are popular for dental hygiene in
the rural areas; Frequency of usage for toothpaste is only 1.5 times among other
consumers, compared with 2 times in the developed world. Per capita consumption of
toothpaste is only 70gm compared with 300gm in Europe and 150 gm in Thailand. Given
the low per capita consumption and penetration rates, toothpaste demand is mainly
being driven by the overall market growth of 8-10%. Toothpowder growth is also being
driven by the rural segment.
Segment
Sub-Segment
Brand Leadership
HUL
Body Care
Soap Bar
Lifebuoy, LUX
HUL
Body Care
Body Wash
LUX
Colgate Palmolive
Oral Care
Toothpaste
Colgate
GCPL
Hair Care
Hair Colour
Godrej Renew
HUL
Hair Care
Shampoo
Dabur
Skin Care
Bleach
Fem Oxybleach
HUL
Skin Care
Face Cream
Marico
Hair Care
Hair Oil
Parachute
Reckitt Benckiser
Body Care
Dettol
Institutional Research
FMCG SECTOR
Institutional Research
FMCG SECTOR
Exhibit 10: Household Care Segment
Sub-Segment
Brand Leadership
Market
Share
Toilet Cleaner
Harpic
69%
GCPL
Fabric Wash
Liquid Wash
Ezee
75%
HUL
Fabric Wash
Detergent
Surf Excel
36%
Ujala
70%
Company
Segment
HUL
Dish Wash
Liquid Fabric
Whitener
Liquid
HUL
Dish Wash
Dish Bar
Dabur India
Home Care
Jyothy Lab
Fabric Wash
Air Freshener
Mosquito
GCPL
Home Care
Repellent
Source: Industry Sources, Bonanza Research
Competitors
Dettol, Lizol,
Domex,
SaniFresh, Mr.
Muscle
Comfort,
Safewash, Vanish
Tide, Ariel, Rin,
Wheel
Robin Blue, Rin
Vim
60%
Pril
Vim
65%
Exo
Odonil
42%
Good Knight
30%
F&B Segment
Brand Leadership
Britannia
Amul
Amul Butter
HUL
Dairy Products
Packaged Foods,
Personal Care
Soups
Nestle
Maggi, Nescafe
ITC
Institutional Research
FMCG SECTOR
Description
Impact
GDP Growth
Positive
Growing Population
Neutral
Changing Lifestyle
Positive
Government Policies
Positive
Modern Trade
Positive
CY12
Cold Cream
Antiseptic Cream
Fairness Cream
Talcum Powder
Shampoo
Toothpaste
Hair Oil
Detergent Bars
Washing Powder
Toilet Soaps
CY13
Source: IBEF
Market Leader
Market Share
Brand Name
Competitors
Hair Oil
Marico
42%
Dabur, Bajaj
Shampoo
HUL
46%
Oral Care
Colgate
50%
Parachute
Sunsilk, Clinic Plus,
Dove
Colgate
HUL, Dabur
P&G, Dabur
Skin Care
HUL
58%
Loreal, P&G
Fruit Juice
Dabur
50%
Real Active
Pepsico
Source: IBEF
Institutional Research
FMCG SECTOR
Indonesia
Skin care
China
Shampoo
Malaysia
Thailand
Toothpaste
Source: IBEF
As refer to Exhibit 15, it is visible that India is having lowest per capita consumption in
low penetrated markets as compared to its neighbouring countries in Asia i.e. China,
Malaysia, Thailand and Indonesia. There could be a scope of high growth in such
categories especially in India. The penetration level in toilet soaps and fabric wash
segment is extremely high which makes very difficult for any new player to enter this
segment and compete with existing majors. With lower penetration in shampoos,
powders and skin cream segments, there is a scope of penetration in these segments
and HUL as an obvious market leader in shampoos and skin cream segment with 46%
market share and 58% market share respectively, is going to be largely benefitted. The
per capita consumption in India for such products is still at a growing stage as compared
to other nations. The per capita consumption of skincare products in India is ~USD 0.3,
shampoos USD 0.3 and toothpastes USD 0.4 indicates high potential for FMCG
companies to expand their reach.
Institutional Research
FMCG SECTOR
78%
75%
70%
68%
64%
63%
59%
54%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Toothbrush
Skin Creams
Detergent Cakes
Tooth Pastes
Salty Snacks
Hair Oils
Washing
Powders/Liquids
Toilet Soaps
Biscuits
35%
Shampoo
80
70
60
50
40
30
20
10
0
Reach (%)
Source: IBEF
Institutional Research
FMCG SECTOR
120.0
100.0
106.3
102.6
100.4 98.0
103.2 93.8 98.5 101.5
97.4 97.2
94.997.5 109.0
99.5 103.5 99.7 105.1
90.5
97.4
94.4 96.0
80.0
79.9 65.9
60.0
53.3
40.0
20.0
Jan'15
Dec'14
Nov'14
Oct'14
Sep'14
Jul'14
Aug'14
Jun'14
Apr'14
May'14
Mar'14
Feb'14
Jan'14
Dec'13
Oct'13
Nov'13
Sep'13
Aug'13
Jul'13
Jun'13
Apr'13
May'13
Mar'13
Feb'13
Jan'13
0.0
Source: http://www.macrotrends.net/1369/crude-oil-price-history-chart
Source: Bloomberg
Institutional Research
9/30/2014
5/31/2014
1/31/2014
9/30/2013
5/31/2013
1/31/2013
9/30/2012
5/31/2012
1/31/2012
9/30/2011
11/30/2014
6/30/2014
1/31/2014
8/31/2013
3/31/2013
10/31/2012
5/31/2012
12/31/2011
7/31/2011
2/28/2011
9/30/2010
4/30/2010
11/30/2009
6/30/2009
1/30/2009
0.0
5/31/2011
200.0
1/31/2011
400.0
9/30/2010
600.0
5/31/2010
800.0
1/31/2010
1000.0
9/30/2009
4500
4000
3500
3000
2500
2000
1500
1000
500
0
5/30/2009
1200.0
Source: Bloomberg
FMCG SECTOR
Palm Fatty Acid Distillate (PFAD) prices down 18% since January 2014
The main contributor in packaging of FMCG products, PFAD have been witnessing a
considerable downside in its prices since Jan 2014. The price of PFAD is now quoting at
USD 583/MT down 18% from USD718 in Dec 2013. Following a decline in crude oil
prices from past couple of quarters, PFAD prices have been declined too.
Institutional Research
FMCG SECTOR
Institutional Research
FMCG SECTOR
8.2
8
7
6.5
6.4
6
5
7.5 7.5
6.5
5.1
4.6
4.4
Q1
Q2
4.5
4
3
2
1
0
CY12
Q3
CY13
Q4
CY14
Source: Tradingeconomics
With higher disposable income due to growing economy and reduction of personal
income taxes over the decades, we believe FMCG industry continues to grow at CAGR
of 12% - 14% between FY15-20 on the back of greater consumer spending and further
liberalization of the sector. Though a slowing economy may cause threat to growth
prospects of FMCG sector but our analysis suggest that in such a worst-case scenario
the FMCG will witness a robust growth of 9%-10% in terms of revenue.
Institutional Research
FMCG SECTOR
5%
6%
3%
10%
Grocers
General Stores
6%
Chemists
8%
Paan Plus
59%
13%
Food Stores
Modern Trade
90%
Others
Traditional
Source: IBEF
Modern Trade
Source: IBEF
Institutional Research
FMCG SECTOR
2011
2012
Marico
Colgate
Palmolive
Nestle India
ITC
Jyothy Labs
GCPL
Britannia
Dabur
HUL
2013
2014
2011
2012
Marico
Colgate
Palmolive
Nestle India
ITC
Jyothy Labs
GCPL
Britannia
Dabur
HUL
2013
2014
2011
2012
Marico
Colgate
Palmolive
Nestle India
ITC
Jyothy Labs
GCPL
Britannia
Dabur
HUL
2013
2014
FMCG SECTOR
Coverage Summary
Godrej Consumer Products Ltd. (GCPL)
Inorganic growth intact
Investment Rationale
Institutional Research
FMCG SECTOR
Re launching existing brands to derive higher demand and keeping market share
intact
Institutional Research
FMCG SECTOR
Institutional Research
India Research
4 April 2015
FMCG
Bloomberg Code
INR 1,073
Target Price:
INR 1,480
38%
Stock Details
GCPL IN
Reuters Code
GOCP.BO
340.4
3,65,249
1,195/701
63.3%
FII
28.9%
DII
1.9%
Others
5.8%
13-Mar-14
7-Apr-14
7-May-14
30-May-14
24-Jun-14
17-Jul-14
12-Aug-14
8-Sep-14
1-Oct-14
31-Oct-14
27-Nov-14
22-Dec-14
15-Jan-15
10-Feb-15
5-Mar-15
Current Price:
GCPL
Nifty
Stock Performance
Return (%)
1 Mth
6 Mths
1 Yr
Absolute
-8%
6%
28%
Relative
-3%
-1%
1%
Analyst
Year to March
FY14
FY15E
FY16E
FY17E
CAGR (%)
76,024
81,914
96,658
114409
15%
EBITDA (Rsmn)
11,629
14,981
17,081
18092
16%
PAT (Rsmn)
8,193
10,263
11,849
12575
15%
15%
18%
18%
16%
EPS (Rs)
24
30
35
37
16%
EV/EBITDA (x)
26
26
22
26
Harsh Gupta
harsh.gupta@bonanzaonline.com
Tel: 91 22 3086 3950
For private circulation only. For important information about Bonanzas rating system and other discloser refer to the end of this material.
Investment Rationale
At CMP of INR 1,073, the stock is trading at 31x of FY16E EPS and 29x of FY17E EPS.
We assign a BUY rating on the stock valuing the Company 40x on FY17E EPS of INR 37
to arrive at target price of INR 1,480 proposing an upside of ~38%.
Institutional Research
90%
60%
80%
50%
70%
60%
40%
50%
30%
40%
20%
30%
20%
10%
10%
0%
0%
Europe
2010
2011
2012
2013
Domestic Business
2014
Indonesia
Middle East
International Business
Latin
America
Africa
FY13
70,000
7,000
60,000
6,000
50,000
5,000
40,000
4,000
3,000
30,000
2,000
20,000
1,000
10,000
0
0
FY12
FY12
FY13
FY14
FY15E
FY13
FY14
FY17E
Institutional Research
FY16E
9M ending Dec
2015
21%
20%
15%
14%
15%
14%
10%
10%
5%
8%
7%
6%
0%
FY12
FY13
FY14
Domestic
9M ending Dec
FY15
19%
17%
18%
11%
11%
FY13
FY14
19%
14%
13%
FY12
Domestic
International
9M ending Dec
FY15
International
Indonesia
Africa
Latam
Europe
Indonesia
Latam
Q3FY15
Europe
Institutional Research
Africa
Q2FY15
Q3FY15
Q2FY15
Q1FY15
Q4FY14
Q3FY14
Q2FY14
Q1FY14
0%
Q1FY15
5%
Q4FY14
10%
Q3FY14
15%
Q2FY14
20%
Q1FY14
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
25%
International business
exhibits a strong revenue
growth though domestic
business PAT margins
outshine international
business PAT margins.
African acquisitions
provides an opportunity to
penetrate aggressively for
a long term growth
Asia
GCPL has acquired an Indonesian company, Megasari in 2010 which is present in the
personal care and household care segment. Megasari offers products like Stella, a
leading brand in Air care segment in Indonesia, HIT, also a leading brand in HI segment
and Mitu, which is present in Baby care segment is one of a leading brand in Indonesia.
Indonesia business currently contributes largest share (40%) in total sales from GCPLs
international business.
Latin America
GCPL has made acquisitions in Chile and Argentina in 2012 and 2010 respectively with
acquisitions of Cosmetica Nacional in Chile and Issue group and Argencos in Argentina.
With such acquisitions the company has made its presence in Latin American markets.
Country
Entry Segment
UK
Personal Care
Acquisition Period
2005
South Africa
2006
Kinky Group
South Africa
Megasari
Indonesia
Tura
Nigeria
Cosmtica Nacional
Chile
2010
Issue Group
Argentina
2010
Argencos
Argentina
2010
Darling Group
South Africa
Frika
South Africa
2007
2008
2010
2010
2011
2015
Institutional Research
1,000
800
600
400
200
0
1/30/2009
1/30/2010
1/30/2011
1/30/2012
1/30/2013
1/30/2014
Source: Bloomberg
18%
18%
15%
18%
16%
15%
15%
13%
13%
12%
11%
FY12
FY13
FY14
EBITDA Margin
FY15
FY16E
11%
FY17E
PAT Margin
Institutional Research
50.8
50
48.1
48
46.4
46
44.9
43.9
44
44.5
42
40
FY12
FY13
FY14
FY15E
FY16E
FY17E
With expectations of introducing GST in upcoming budget w.e.f. 1 st April 2016, the scope
of margin improvement will add to GCPLs profitability. The company would be able to
save on its freight and transportation cost. The rate of GST on services is likely to be
16% and on goods is proposed to be 20% excise duty.
Institutional Research
FY13
FY14
Total Revenues
FY15E
EBITDA
FY16E
FY17E
PAT
Institutional Research
Px = 1183 @ p/e of 53
Px = 1026.7 @ p/e of 46
Px = 870.48 @ p/e of 39
Px = 714.24 @ p/e of 32
Px = 558.00 @ p/e of 25
Institutional Research
Company Profile
Godrej Consumer Products Ltd (GCPL) is present in FMCG sector with leading
Household and Personal Care Products. GCPL's products include soap, hair colorants,
toiletries and liquid detergents. Its brands include 'Cinthol', 'Godrej Fair Glow', 'Godrej
No.1' and 'Godrej Shikakai' in soaps, 'Godrej Powder Hair Dye', 'Renew', 'Colour Soft' in
hair colourants and 'Ezee' liquid detergent. GCPL currently operates several
manufacturing facilities in India spread over seven locations and grouped into 4
Operating Clusters at Malanpur (Madhya Pradesh), Guwahati (Assam), Baddi-Thana
(Himachal Pradesh), Baddi-Katha (Himachal Pradesh), Pondicherry, Chennai and
Sikkim. GCPL has bought out foreign companies in UK, Africa, Latin America and Asia
as a part of its strategic move. They have made several acquisitions mainly in 3
continents where they are focused, Africa, Asia and Latin America and in 3 segments
Hair Care, Home Care and Personal Care segment.
Q2FY14
Q3FY14
Q4FY14
Household Insecticides
Q1FY15
Hair Colors
Q2FY15
Q3FY15
Soaps
Gauging on quarterly basis, the growth across all the segments have been subdued in
past few quarters due to higher base growth in same quarters of the preceding year.
Going forward we expect uptick in volume growth on back of lower crude oil prices and
economic growth coming back on track. Going forward, we expect higher growth to be
seen again in HI and Hair Colors segment and a constant growth of lower double digit in
Soap segment.
Exhibit 16: Business Growth in Constant Currency Terms
Domestic Business
Insecticides
Soaps
Q3FY14 (Y-o-Y)
Q4FY14 (Y-o-Y)
Q1FY15 (Y-o-Y)
Q2FY15 (Y-o-Y)
Q3FY15 (Y-o-Y)
13%
12%
6%
7%
12%
8%
17%
9%
2%
16%
6%
1%
2%
13%
11%
Hair Colors
37%
16%
14%
9%
10%
Liquid Detergents
36%
NA
NA
NA
13%
International Business
22%
12%
14%
12%
20%
Indonesia
18%
1%
10%
15%
19%
Africa
29%
39%
17%
15%
36%
Latin America
Europe
15%
5%
-4%
31%
25%
124%
16%
42%
-9%
-13%
Institutional Research
80%
60%
40%
28%
20%
0%
Rural
Urban
FY14
Product Portfolio
Subsidiary companies
Country
Segment
Brands
Godrej UK
UK
Personal Care
South Africa
Inecto, Kinky
Godrej Nigeria
Nigeria
Personal Care
Tura
Darling
Africa
Hair Care
Darling
Godrej Argentina
Argentina
Hair Color
Cosmetica Nacional
Chile
Hair Color
Godrej Indonesia
Indonesia
Home Care
Sharjah
Bangladesh
Srilanka
India
Recent Developments
Godrej Consumer Products has hiked its stake in hair extension brand Darling South
Africa and Mozambique businesses to 90%.
GCPL also acquired South Africa's hair extensions firm Frika Hair in 2015 for an
undisclosed sum in order to consolidate its position in the South African market. Frika
has annualized revenues of USD 200 mn.
Institutional Research
Financials
P&L
Particulars (mn)
Sales
Less : Excise Duty
Rate of Excise Duty
Other Operational Income
Net Sales
Cost of Materials
Change in Inventory
Operating & Other expenses
Total Operating Expenses
EBITDA
Depreciation
EBIT
Other exceptional Income
Interest Expenses
Other income
EBT
Tax
Current Tax
Deferred Taxation
Profit After tax
No. of shares
EPS
Ratio Analysis
FY14
78,031
2,205
3
198
76,024
35,043
667
28,686
64,396
11,629
819
10,810
59
1,199
627
10,297
2,104
2,167
(63)
8,193
340
24
FY15E
84,273
2,360
3
FY16E
99,443
2,784
3
FY17E
117,342
2,934
3
81,914
36,996
96,658
44,252
114,409
54,504
29,937
66,933
14,981
884
14,097
35,325
79,577
17,081
990
16,091
41,813
96,317
18,092
1,089
17,003
1,199
1,199
1,199
12,898
2,635
14,892
3,043
15,804
3,229
10,263
340
30
11,849
340
35
12,575
340
37
FY14
FY15E
FY16E
FY17E
11,629
14,981
17,081
18,092
15%
18%
18%
16%
11%
13%
12%
11%
ROE (%)
22%
22%
21%
19%
24
30
35
37
EPS (INR)
P/E (x)
Enterprise Value (EV)
35
37
32
38
298,875
383,018
378,314
473,616
26
26
22
26
Balance Sheet
Particulars (mn)
FY14
Share Capital
340
Share warrants
52
Reserves and Surplus
37,361
Loan Funds
15,903
Secured Loans
Unsecured Loans
15,903
Deferred tax Liability
(203)
Other long term liability
56
Total
53,509
Application of Funds
Fixed Assets
58,035
Less : Depriciation
6,821
Less: Impairment of Fixed Assets
Net Block
51,214
Capital Work in Progress
1,671
Investments
1,363
Long Term Loan and Advances
8,285
Current Assets
27,645
Inventories
10,821
Sundry debtors
7,113
Cash and Bank Balances
7,048
Other Current Assets
1,020
Loans and Advances
1,643
Current Liablities & Provisions 36,255
Current Liablities
27,482
Short & Long Term Provisions
8,773
Net Current Assets
(8,610)
Misc. Exp.
(412)
Total
53,509
Source: Company, Bonanza Research
Institutional Research
Cash Flow
FY15E
340
45,633
15,903
15,903
265
53
62,194
FY16E
340
55,492
15,903
15,903
265
53
72,053
FY17E
340
66,076
15,903
15,903
265
53
82,637
Particulars
Profit Before Tax
FY14
FY15E
FY16E
FY17E
10,297
12,898
14,892
15,804
1,675
2,083
2,189
2,288
1,693
(3,647)
3,031
2,753
13,664
11,334
20,112
20,845
(2,635)
(3,043)
(3,229)
13,664
8,699
17,069
17,617
(4,948)
(3,871)
(9,174)
(8,971)
(6,333)
(3,190)
(3,190)
(3,190)
2,384
1,638
4,705
5,456
62,678
7,705
70,199
8,695
77,219
9,785
54,972
61,504
67,435
1,363
9,184
32,400
12,741
8,307
8,686
1,110
1,556
35,725
27,986
7,739
(3,325)
1,363
10,837
41,374
15,034
9,803
13,391
1,310
1,837
43,024
34,089
8,935
(1,650)
1,363
12,787
52,144
17,637
11,726
18,847
1,573
2,362
51,091
41,609
9,482
1,052
62,194
72,053
82,637
India Research
4 April 2015
Reinforcing Pillars
Britannia Industries Ltd. (BIL) is well placed for gaining market share in the premium
biscuits segment. Biscuits Industry is mainly dominated by 3 organised players in Indian
market Parle, ITC and Britannia. The company has a focused approach towards biscuits
segment with introducing new launches in premium segment recently and moreover
introducing different segments into play apart from biscuits category. The company has
added health focused brands in their product portfolio such as Oat, Ragi, 5 grain biscuits
etc. under their NutriChoice brand, breakfast food such as Poha, Upma and also present
in dairy products by introducing Butter, Cheese and Milk. BIL is making their distribution
network strong for fast and easy availability of their products to the consumers with great
focus on optimizing their cost through various measures. We expect company to register a
CAGR of 14-15% in FY14-FY17E. We initiate coverage on the stock with a Buy rating with
a target price of INR 2600.
Innovation in Pillar brands to increase market share
FMCG
Current Price:
INR 2,185
Target Price:
INR 2,600
19%
Stock Details
Bloomberg Code
BRIT IN
Reuters Code
BRIT.BO
120
2,62,200
DII
9.2%
OtheINR
20.5%
BIL
The continuous fall in commodity prices from past few months have been positive for the
industry. In case of BIL, the prices of sugar have been softened from past few months. The
sugar prices came down to INR 2,648 per quintal in Nov 2014 compared to INR 3,356 in
Nov 2012 whereas the prices of wheat has not much impacted and remain stable at INR
1,590 per quintal. The fall in crude oil prices would also help the company to lower their
freight cost. Moreover the company is taking various measures to keep their cost in check.
Year to March
FY14
FY15E
FY16E
FY17E
CAGR (%)
63,074
71,313
84,860
1,02,829
18%
5,966
7,364
8,763
10,198
20%
3,698
5,581
5,351
6,278
19%
9%
10%
10%
10%
EPS (INR)
31
47
45
52
19%
EV/Sales
1.6
3.5
2.9
2.3
EV/EBITDA
16.9
34.2
28.5
23.7
Sensex
Stock Performance
Return (%)
Key Financials
13-Jan-15
300
250
200
150
100
50
0
13-Nov-14
BIL is adding brands for health conscious people which suit the special lifestyle and
nutrition needs of diabetics to manage extreme swings in blood sugar. The company is
adding these brands under their range of Nutri-Choice biscuits. They have introduced
brands like Nutri-Choice Digestive, Nutri-Choice 5 Grain, Nutri-Choice Ragi, Nutri-Choice
Oat cookies and Nutri-Choice SugarOut. Apart from Biscuits BIL have now dairy products
to offer too for a healthy meal plan. BIL offers Milk, Curd, Butter, Cheese, Gourmet etc.
19.4%
13-Sep-14
50.7%
FII
13-Jul-14
BILs Sales, distribution and channel capabilities have been strengthened to increase width
(increase in number of stores) of distribution in rural markets and depth (increase
sales/store) in the urban markets. The company has already managed to increase number
of rural distributors by 50%. BIL has a direct reach to 0.5 mn outlets two years ago and
expecting to be close to 1 mn by FY16. The overall expansion plan is to reach 4.5 mn
outlets in the next four-five years.
Promoter Group
13-May-14
13-Mar-14
BILs power brand Good Day has gained a substantial market share against its closed
competitors like Parle and ITC. Good Day has become INR 1,600 crore brands and sells
over 50 lakh packs every day. BIL is innovating new variant for their existing pillar brands.
The company has recently launched Good Day Chunkies and NutriChoice Havens in
Biscuits segment with Britannia Cake catering to the Cake and Rusks segment.
2,250/821
13-Mar-15
INITIATING COVERAGE
1 Mth
6 Mths
1 Yr
Absolute
3%
55%
161%
Relative
8%
48%
134%
Analyst
Harsh Gupta
harsh.gupta@bonanzaonline.com
Tel: 91 22 3086 3950
For private circulation only. For important information about Bonanzas rating system and other discloser refer to the end of this material.
Investment Rationale
At CMP of INR 2,185, the stock is trading at 46x of its FY15E EPS of INR 47 and
49x of its FY16E EPS of INR 45. We believe the overall outlook is positive for the
FMCG industry considering lower raw material prices, introduction of GST and
improving economic health which supports higher valuations for the industry.
Hence we assign a P/E of 50x to FY17E EPS of INR 52, considering demand
uptick in premium biscuits segment, though BIL has registered a onetime gain by
selling off its land & building in Q2FY15 which has amplified its earnings in FY15.
We assign a Buy rating on the stock with a target price of INR 2,600.
Institutional Research
Apart from Good Day, other pillar brands like NutriChoice, 50:50, Marie Gold and
Tiger have been performing well. The total market share of Parle is still largest
with its popular Brand Parle G under biscuit category of INR 100/kg but BIL is
able to capture the market share in premium brand segments with its pillar
brands like Good Day and NutriChoice.
The cookies segment is growing at a CAGR of 14% in India. The mid-premium
cookies segment is relatively smaller in size with INR 1,800 cr. consumer spends
but has witnessed a CAGR of 20% in recent years. To maintain its leadership in
the lucrative cookies segment, BIL has strengthened Good Day portfolio with the
introduction of a new brand Good Day Chunkies. Moreover under its NutriChoice
brand, BIL has added NutriChoice Havens which is a mix of Oats and
Cranberries.
Institutional Research
4,000
45%
3,500
40%
35%
3,000
15%
10%
FY12
FY13
FY14
FY15E
25%
2,000
20%
1,500
15%
5%
1,000
0%
500
FY16E FY17E
30%
2,500
10%
5%
0%
-5%
FY12
FY13
FY14
FY15E
Growth ( YoY)
FY17E
Growth ( YoY)
12,000
FY16E
2,000
250%
1,800
10,000
20%
1,600
200%
1,400
8,000
15%
6,000
1,200
150%
1,000
10%
4,000
800
100%
600
5%
2,000
50%
400
200
0%
FY12
FY13
FY14
FY15E
Institutional Research
FY16E
FY17E
Growth ( YoY)
0%
FY12
FY13
FY14
FY15E
FY16E
FY17E
Growth ( YoY)
BIL had a direct reach to 0.5 mn outlets two years ago and expecting to be close
to 1 mn by FY16. The overall expansion plan is to reach 4.5 mn outlets in the
next four-five years.
Moreover, salespersons carrying hand held devices has been increased to 50%,
(25% a year earlier), for effective monitoring of sales. BIL has been able to
reduce the distance travelled by its products by 20% in the last three years.
Through its optimized manufacturing foot print, There is a sharp focus on product
availability and freshness of the stock and has substantially improved the count
of stock on shelves within 33% of the shelf life of the products, most notably in
cakes and rusks and to almost to level of biscuits.
Good Day and NutriChoice biscuits have added nearly half a dozen new
manufacturing units with plans to invest Rs 400 crore in the next 18 months to
set up additional capacity and increase its in-house production to 60-65% of its
total sales from 46% now. The company has also doubled its direct distribution
where it was traditionally weaker. It will soon open a R&D centre in Bangalore to
enable faster innovations and new launches.
5,000,000
4,500,000
4,000,000
80%
3,500,000
70%
60%
3,000,000
CAGR - 35%
2,500,000
50%
2,000,000
1,500,000
40%
30%
CAGR - 26%
1,000,000
20%
500,000
10%
0%
FY12
FY14 FY15E
Institutional Research
FY20E
Urban Markets
Rural Markets
Source: IBEF
BIL is diversifying
itself from just
being a biscuit
player, targeting
foods for healthy
breakfast
Competitors
NutriChoice Havens
NutriChoice Oat
Cookies
NutriChoice ragi
cookies
NutriChoice 5 grain
NutriChoice Digestive
Dairy
NutriChoice sugarout
Competitors
Amul, Mother Dairy,
Local Players
Amul Kool
Amul, Danone
Amul, Danone
Dairy Whitener
Umang Dairies
Butter
Amul
Upma
Local Players
Masala Chaas
Amul
Poha
Local Players
Kellogs, Saffola, Quaker,
Bagrrys
Milk
Amul
Dahi Fresh
Amul, Danone
Ghee
Amul
Institutional Research
We expect an
improvement of 100
bps of improvement
in its EBITDA
margins with lower
food prices.
The continuous fall in commodity prices from past few months have been
positive for the industry. In case of BIL, the prices of sugar have been softened
from past few months. The sugar prices came down to INR 2,648 per quintal in
Nov 2014 compared to INR 3,356 in Nov 2012. The fall in crude oil and other
commodity prices can support the fall of sugar prices whereas the prices of
wheat has not much impacted and remain stable at INR 1,590 Per quintal.
Exhibit 8: Palm Oil Price Trend (USD/MT)
1,400
4,500
1,200
4,000
1,000
3,500
3,000
800
2,500
600
2,000
400
1,500
Nov-14
Jul-14
Sep-14
Mar-14
May-14
Jan-14
Nov-13
Jul-13
Sep-13
May-13
Jan-13
Mar-13
Nov-12
Jul-12
Sep-12
500
May-12
0
Jan-12
1,000
Mar-12
200
0
5/30
5/30
5/30
5/30
5/30
5/30
13
Lamination Roll
8
Flour
27
Others
24
Sugar
Institutional Research
Institutional Research
The dairy and cakes segment is still at a nascent stage and leaves a scope of
high penetration going forward though the dairy segment has been highly
competitive by presence of Amul. BILs premium biscuits and cakes segment is
going to benefit with higher consumer spending.
Britannias Subsidiaries Performance - Turnover (LHS), PAT (RHS)
Exhibit 11: Britannia Dairy Pvt. Ltd.
3,500
400
3,000
300
2,500
200
100
2,000
0
1,500
-100
1,000
-200
500
-300
-400
0
FY10
FY11
FY12
Turnover (mn)
FY13
3,000
100
2,500
50
2,000
1,500
-50
1,000
-100
500
-150
-200
FY14
FY10
PAT (mn)
FY11
FY12
Turnover (mn)
FY13
FY14
PAT (mn)
300
250
200
150
100
50
0
FY10
FY11
FY12
Turnover (mn)
Source: Ace Equity, Bonanza Research
Institutional Research
FY13
PAT (mn)
FY14
1,600
40
1,400
20
1,200
1,000
-20
800
-40
600
-60
400
-80
200
0
-100
FY10
FY11
FY12
Turnover (mn)
FY13
FY14
PAT (mn)
Institutional Research
Px = 2475 @ p/e of 75
Px = 2145 @ p/e of 65
Px = 1815 @ p/e of 55
Px = 1485 @ p/e of 45
Px = 1155 @ p/e of 35
Increase in raw material prices i.e. Wheat, Sugar or Palm Oil Prices will
affect profit margins for the company
Institutional Research
Institutional Research
Financial Charts
Exhibit 16: Total Revenues & Profit after Tax
120,000
10%
104,716
10%
100,000
10%
9%
10%
86,417
80,000
8%
72,622
64,232
57,008
60,000 50,328
6%
7%
8%
6%
6%
6%
6%
FY16E
FY17E
4%
40,000
4%
4%
2%
20,000
1,867
2,339
5,581
3,698
5,350
6,278
0%
0
FY12
FY13
FY14
FY15E
FY16E
FY12
FY17E
FY13
FY14
FY15E
EBITDA Margin
70
PAT Margin
40
64
60
34
35
30
50
41
40
25
24
36
34
32
30
20
43
29
25
20
36
17
17
15
28
20
10
16
10
0
FY10
FY11
FY12
ROCE (Standalone)
Source: Ace Equity, Bonanza Research
FY13
FY14
2012
ROE (Standalone)
2013
2014
2015E
2016E
2017E
EV/EBITDA
Source: Ace Equity, Bonanza Research
BIL is a debt free company with returns of more than 40% on its equity in FY14
and FY15E. The EBITDA margins too are expected to escalate from an average
of 7% to 10% in FY15 and going forward on back of lower raw material cost.
BILs enterprise value expected to be 30x of its EBITDA on back of significant
jump in its market capitalization in FY15.
Institutional Research
Financials
Ratio Analysis
P&L
FY14
FY15E
FY16E
FY17E
Ratio Analysis
FY14
FY15E
FY16E
FY17E
64,232
72,622
86,417
104,716
EBITDA Margin
9%
10%
10%
10%
1,158
1,309
1,557
1,887
PAT Margin
6%
8%
6%
6%
Net Sales
63,074
71,313
84,859
102,829
EV/EBITDA
17
35
31
26
Cost of Materials
38,223
42,484
50,554
61,782
Debt / Equity
Change in Inventory
(126)
ROE
19,010
21,465
25,543
30,849
57,108
63,949
76,097
92,631
5,966
7,364
8,763
10,198
634
775
913
986
EBIT
5,332
6,589
7,850
9,211
(200)
1,599
54
EBITDA
Depreciation
Interest Expenses
Other income
5,426
8,188
7,850
9,211
Tax
1,728
2,607
2,500
2,933
3,698
5,581
5,350
6,278
120
120
120
120
31
47
45
52
EPS
0.0
0.0
0.0
48%
36%
34%
348
EBT
No of shares (mn)
0.0
43%
Balance Sheet
Particulars (Rs mn)
Cash Flow
FY14
FY15E
FY16E
FY17E
240
240
240
240
8,338
11,486
14,505
18,120
Loan Funds
Secured Loans
Unsecured Loans
Share Capital
Share warrants
Reserves and Surplus
92
188
191
191
191
8,860
11,921
14,940
18,555
Fixed Assets
9,393
11,063
13,030
14,072
Less : Depriciation
3,937
4,712
5,624
6,610
Net Block
5,457
6,352
7,406
7,462
883
Total
Application of Funds
972
2,290
2,323
2,323
Investments
1,440
1,440
1,440
1,004
1,452
1,663
Current Assets
7,160
14,352
17,629
28,111
Inventories
3,669
4,613
5,489
6,338
Sundry debtors
537
778
926
1,133
658
5,834
7,494
16,319
10
28
33
28
2,287
3,099
3,688
4,292
9,584
13,998
15,522
17,900
Current Liablities
6,331
9,088
10,815
12,376
FY15E
FY16E
FY17E
8,188
7,850
9,211
775
913
986
8,963
8,763
10,198
2,399
(94)
722
11,362
8,669
10,920
(2,607)
(2,500)
(2,933)
8,754
6,169
7,987
(1,146)
(2,178)
3,502
(2,432)
(2,332)
(2,663)
5,177
1,659
8,825
121
3,254
4,910
4,707
5,524
(2,424)
354
2,108
10,211
8,860
11,921
14,940
18,555
Biscuit Industry
Indias biscuit market is estimated to be worth INR 23,000 crore and growing at
the rate of 8% per annum. The premium category accounts for 25% of the overall
biscuits category and is growing at 17% per annum. The focus on premium and
health biscuits comes amid a slowdown of the category growth from mid-teens
over two years ago to single digits. The slowdown in rural areas was even
sharper. However, the rural growth rate is still higher than urban. We may expect
the trend of premiumisation will accelerate going forward but mass people
product cannot be ignored.
Exhibit 20: Biscuits Per capita consumption globally
12
11%
10
40%
8
15%
6
4
2
38%
Parle
India
US
Japan
Britannia
Priya Gold
ITC
Others
Singapore
Source: IBEF, Bonanza Research
FY13
FY14
FY15E
FY16E
FY17E
Cake
Others
FY12
FY13
FY14
Q2FY15
9%
4%
4%
8%
35.7%
36.8%
38.9%
38.8%
5.6%
6.7%
9.6%
10.9%
Institutional Research
Biscuit Competitors
Cake
NutriChoice Havens
Britannia Breads
Fruit Rollz
Gourmet Cheese
Multi Fiber
Veg Cakes
Actimind
NutriChoiceragi cookies
NA
Multi Grain
TigerzorBadam Milk
NutriChoice 5 grain
NutriChoice sugarout
Britannia Tiger
Milk Bikis
Little Hearts
Nice Time
Parle Coconut
NutriChoice Digestive
Marie Gold
Fifty Fifty
Jim Jam
Good Day (Cashew/Butter)
Bourbon
Good Day Chunkies
Dairy
Dairy Whitener
Butter
Masala Chaas
Milk
Dahi Fresh
Ghee
Company Profile
Britannia Industries Ltd. (BIL) is in the business of bakery and dairy products,
which include biscuits, bread, dairy products, rusk and cakes. BIL holds around
38% market share in biscuit segment and sales from this segment contribute
83% to its total sales. Some of the major brands of Britannia are Tiger, Good
Day, Nutri-Choice, Marie Gold, 50:50 etc. Its dairy products include Britannia
Butter, Britannia Cheese Slices, Britannia Milk, Britannia Slimz Milk, Britannia
Flavoured Yoghurt and Britannia Daily Fresh Dahi. The Company through its
wholly owned subsidiary, Daily Bread Gourmet Foods Pvt Ltd., offers bakery
products, including cakes, salads, pastas, specialty breads, Ragi Bread, Omega
3 Bread and range of health breads, among others. It has around 36 stores and
serves cafe chains and multiplex chains. It has operations in Mumbai, Delhi,
Kolkata, Chennai, Odisha and Uttaranchal, among others.
Institutional Research
India Research
4 April 2015
strategies
will
enhance
FMCG
19%
Stock Details
Bloomberg Code
JYL IN
Reuters Code
JYOI.BO
181
49,413
315/171
66.8%
FII
15.4%
DII
8.0%
Others
9.8%
JLL
Nifty
200
150
100
50
13-Jan-15
Stock Performance
Return (%)
1 Mth
6 Mths
1 Yr
Absolute
-2%
12%
32%
Relative
3%
5%
5%
Key Financials
Year to March
Net Sales (Rs mn)
EBITDA (Rs mn)
PAT (Rs mn)
EBITDA Margin (%)
EPS (Rs)
EV/EBITDA (x)
FY14
12,602
1,668
1,061
13%
6
25
FY15E
14,616
2,334
1,585
16%
9
25
FY16E
15,539
2,801
2,064
16%
11
21
FY17E
20,828
3,166
2,321
15%
13
18
CAGR (%)
18%
24%
30%
29%
-
13-Mar-15
0
13-Nov-14
INR 325
13-Sep-14
INR.273
Target Price:
13-Jul-14
Current Price:
13-May-14
13-Mar-14
Transformed
prospects
Analyst
Harsh Gupta
harsh.gupta@bonanzaonline.com
Tel: 91 22 3086 3950
For private circulation only. For important information about Bonanzas rating system and other discloser refer to the end of this material.
Investment Rationale
At CMP of INR 273, the stock is trading at 25x of FY16E EPS of INR 11 and 21x of
FY17E EPS of INR 13. We assign a BUY rating on the stock valuing the Company 25x
on FY17E EPS of INR 13 to arrive at target price of INR 325 proposing an upside of
~19%.
Institutional Research
Investments in high
growth brands to
aid JLL improve its
margins.
JLL has recently launched Pril with a gel based formulation and named as Pril Kraft-Gel
in dish wash segment. Overall Pril Liquid is showing a good growth since it has been
launched. In Q2FY15 it has grown by more than 20% and as a brand, grown by 17% in
the same quarter. JLL has also re-launched Margo soap brand with Margo face wash in
two variants; one is the original Neem and the other is Neem& Saffron variant.
JLL has introduced Henko LINTelligent for washing machines which have been about
more than 5 months since the launch of product in the market place. JLL has spent
significantly on the promotion of this brand and expected to continue investing behind
Henko both from a marketing as well as distribution standpoints. The company has
grown this business by about 39% during the quarter.
JLL is likely to keep their spending on Advertising and Promotion to 12.4% of the total
sales from 9% in Q3FY14 due to new launches they have made in the recent past. As
per the management, the major portion of A&P spend will be on Henko.
Institutional Research
Robust growth in HI
segment in Q3FY15
due to lower base
formed in previous
quarters, expected
to be strong going
forward.
Dishwashing
Mosquito
Repellant
Q3FY14
Laundry
Services
Q3FY15
Dishwashing
Mosquito
Repellant
YTD FY14
Laundry
Services
YTD FY15
Institutional Research
180
18%
175
16%
170
14%
165
12%
160
10%
155
8%
150
6%
145
4%
2/6/2015
1/6/2015
12/6/2014
11/6/2014
10/6/2014
9/6/2014
8/6/2014
7/6/2014
6/6/2014
5/6/2014
4/6/2014
3/6/2014
2/6/2014
1/6/2014
140
2%
0%
FY12
FY13
FY14
FY15E
EBITDA Margin
FY16E
PAT Margin
25,000
20,000
3500
40%
3000
35%
2500
30%
15,000
2000
10,000
1500
FY17E
25%
20%
1000
5,000
0
FY12
FY13
FY14
Institutional Research
FY15E
FY16E
EBITDA (mn)
15%
10%
500
5%
0%
FY17E
PAT (mn)
FY12
FY13
FY14
ROE
FY15E
FY16E
ROCE
JLL has a strong distribution network of total 2.9 mn outlets (Direct coverage of 1 mn
outlets) with backward integrated operations into manufacturing bottles enhancing
penetration across India. The companys distribution strength compares well with most
other FMCG majors like HUL and ITC considering size and scale of operations.
Ujala has close to 70% market share making it the undisputed leader in fabric whitener
category, with the closest competitor (Robin Blue) having market share less than 5%.
JLL sells approximately 1 mn bottles of Ujala Supreme every day.
Exhibit 7: Shifting focus to Pan India Presence from just being a south Indian player
70%
60%
50%
40%
30%
20%
10%
0%
FY13
FY14
South India
YTD FY15
70
80
60
70
50
60
50
40
40
30
30
20
20
10
10
0
Ujala Fabric
Whitener
Maxo Coil
Q3FY13
Maxo Liquid
Q2FY14
Institutional Research
Pril Liquid
Q3FY14
Exo Bar
Ujala Fabric
Whitener
Maxo Coil
Q3FY13
Maxo Liquid
Q2FY14
Pril Liquid
Exo Bar
Q3FY14
Jun 30 2014
Sep 30 2014
Sep 30 2013
Dec 31 2013
Mar 31 2014
Mar 31 2013
Jun 30 2013
Jun 30 2012
Sep 30 2012
Dec 31 2012
Dec 31 2011
Mar 31 2012
Mar 31 2011
Jun 30 2011
Sep 30 2011
Sep 30 2010
Dec 31 2010
Dec 31 2009
Mar 31 2010
Jun 30 2010
Jun 30 2009
Sep 30 2009
Sep 30 2008
Dec 31 2008
Mar 31 2009
Mar 31 2008
Jun 30 2008
Px = 214.65 @ p/e of 45
Px = 176.49 @ p/e of 37
Px = 138.33 @ p/e of 29
Px = 100.17 @ p/e of 21
Px = 62.01 @ p/e of 13
Institutional Research
Financials
Ratio Analysis
P&L
Particulars (Rs mn)
FY14
Sales
13,062
Less : Excise Duty
460
Net Sales
12,602
Cost of Materials
6,711
Change in Inventory
Operating & Other expenses
4,168
Total Operating Expenses
10,934
EBITDA
1,668
Depreciation
616
EBIT
1,052
Other exceptional Income
Interest Expenses
531
Other income
565
EBT
1,063
Tax
2
Profit After tax
1,061
No. of shares
181
EPS
6
Source: Company, Bonanza Research
FY15E
15,146
530
14,616
7,573
FY16E
18,175
636
17,539
9,087
FY17E
21,810
981
20,828
10,905
4,709
12,282
2,334
665
1,669
(23)
531
450
1,587
3
1,585
181
9
5,651
14,738
2,801
719
2,082
6,758
17,663
3,166
776
2,390
464
450
2,068
4
2,064
181
11
516
451
2,325
4
2,321
181
13
Balance Sheet
Particulars (Rs mn)
FY15E
FY16E
FY17E
181
181
181
181
8,624
10,208
12,272
14,593
Loan Funds
5,159
5,159
5,159
5,159
Secured Loans
5,150
5,150
5,150
5,150
265
265
265
1,472
53
53
53
15,436
15,866
17,930
20,251
Fixed Assets
8,298
8,962
9,679
10,453
Less : Depriciation
1,950
2,616
3,334
4,110
Net Block
6,299
6,346
6,345
6,343
939
939
939
Share warrants
Unsecured Loans
Deferred tax Liability
Other long term liability
Total
Application of Funds
FY14
FY15E
FY16E
FY17E
EBITDA Margin
13%
16%
16%
15%
PAT Margin
8%
11%
12%
11%
EV/EBITDA
25
24
21
18
Debt / Equity
0.6
0.5
0.4
0.4
ROE
12%
15%
17%
16%
ROCE
14%
26%
30%
38%
Cash Flow
FY14
Share Capital
Ratio Analysis
35
1,063
1,587
2,068
2,325
585
746
733
842
1,648
2,334
2,801
3,167
10
(869)
(971)
110
1,658
1,465
1,830
3,277
(193)
(3)
(4)
(4)
1,465
1,462
1,826
3,273
Adjustments
Operating Profit before working
capital changes
Adjustments for Working Capital
changes
Cash Generated From Operations
Income Tax Paid
Net Cash flow from Operating
Activities
Net Cash flow from Investing
Activities
Net Cash flow from Financing
Activities
Net Change in cash and cash
equivalents
Source: Company, Bonanza Research
(14)
(65)
120 (1,805)
(584)
(592)
939
55
6,982
8,392
10,070
13,096
Current Assets
4,030
4,615
5,204
5,932
Inventories
1,612
2,006
2,407
2,858
556
2,291
2,749
3,264
556
(1,249)
(1,833)
(2,425)
751
788
945
1,122
554
781
937
1,112
2,905
4,426
4,628
6,058
Current Liablities
1,463
2,272
2,353
2,726
1,443
2,154
2,275
3,332
1,125
189
576
(126)
15,436
15,866
17,930
20,251
Sundry debtors
Total
Source: Company, Bonanza Research
Institutional Research
Company Profile
Jyothy Laboratories, Ltd. manufactures and distributes household products. The
Company is engaged in manufacturing and marketing of fabric whiteners, soaps,
detergents, mosquito coils and incense sticks. It operates in two segments: Soaps &
Detergents and Home Care. Soaps and Detergents include fabric whiteners, fabric
detergents, dish wash bar and soaps including ayurvedic soaps and Home Care
products include incense sticks, dhoop and mosquito coils and scrubber. Its subsidiaries
include Jyothy Fabricare Services Limited, Jyothy Kallol Bangladesh Limited, Associated
Industries Consumer Products Pvt Ltd., Jyothy Consumer Products Marketing Ltd, and
Diamond Fabcare Private Ltd.
Exhibit 11: Sales Break Up
12,000
1,400
10,000
1,200
1,000
8,000
800
600
6,000
400
4,000
200
0
2,000
-200
FY11
FY12
FY13
FY14
-400
0
FY12
FY13
FY14
Home Care
FY15E
Others
Others
Laundry Services
Competitors
Home Care
Competitors
Pears, Lifebuoy,
Garnier, Ponds
Maxo
FA
Axe
Colgate, Close-up
Maya
Fabric Care
Henko
Ujala
Mr. White
Rin
Active Wheel
More Light
Active Wheel
Dish wash
Exo
Vim Bar
Pril
Vim Liquid
Institutional Research
Institutional Research
India Research
4 April 2015
BUY
Treading Water
Hindustan Unilever Ltd. has registered a CAGR of 37% from FY09 to FY14 in its revenues
and 9% CAGR in its net profits. We expect HULs revenue CAGR to sustain at 12% over
FY12-16E on back of higher base growth. Foods, personal products and ice cream will be
the growth drivers in this phase, while soaps & detergents (S&D) and beverages will see
moderation in growth. Innovation and re-launches in higher margin personal products
(PP), coupled with lower raw material prices, will drive a 100bps margin expansion to 15%
in FY15E and FY16E. While we are positive on HULs growth prospects, we note that the
stock has outperformed Nifty by 24% in the past one year. Valuations at 44x are also at
the higher-end of the 5-year trading range. We base our target price on 40x PE multiple of
FY17 earnings and initiate coverage with a BUY.
FMCG
2,162
19,04,722
Re-launching existing brands to derive higher demand and keeping market share
intact
HUL has been re launching its existing brands across varied segments. The company has
made re-launches in detergents and skin care segment. Launch of new RIN variant and
Lakm exciting innovations. Lakm skin forayed into the anti-aging segment with the
launch of Youth Infinity skin cream. In addition, a new Complexion Care (CC) cream was
introduced, the Perfect Radiance range was re-launched and the facial cleansing portfolio
was revamped with the addition of new Clean Up range.
Growth overhangs in rural segment, volumes still to pick up
The demand from rural areas has not been picking up from past few quarters and still not in
sight for the coming quarters. We expect that rural growth will be dependent on the
monsoon conditions starting Jun15, till that time we may expect a subdued growth from the
rural segment. Moreover with growth near saturation in soap and detergents, HUL is more
dependent on its other brand portfolio in Skin Care, Hair care and F&B segment for its
growth. In the last three quarters, the growth in domestic business has been declining from
13% in Q1FY15 to 8% in Q3FY15.
INR 881
Target Price:
INR 1,000
14%
Stock Details
Bloomberg Code
HUVR IN
Reuters Code
HLL.BO
981/550
67.2%
FII
15.0%
DII
3.9%
Others
13.9%
13-Mar-14
13-Apr-14
13-May-14
13-Jun-14
13-Jul-14
13-Aug-14
13-Sep-14
13-Oct-14
13-Nov-14
13-Dec-14
13-Jan-15
13-Feb-15
13-Mar-15
Current Price:
HUL
Nifty
Stock Performance
Return (%)
1 Mth
6 Mths
1 Yr
Absolute
-5%
16%
44%
Relative
0%
9%
17%
Key Financials
Year to March
Net Sales (Rsmn)
FY14
FY15E
FY16E
FY17E
CAGR (%)
2,80,191
3,12,348
3,51,777
3,99,948
13%
Analyst
Harsh Gupta
harsh.gupta@bonanzaonline.com
Tel: 91 22 3086 3950
EBITDA (Rsmn)
44,442
53,961
60,772
64,331
13%
PAT (Rsmn)
38,675
45,896
51,157
53,713
12%
16%
17%
17%
16%
EPS (Rs)
17.9
21.2
23.7
25
12%
EV/Sales (x)
36.4
36.5
32.1
31.1
Investment Rationale
At CMP of INR 881, the stock is trading at 37x of FY16E and 35x of FY17E EPS. We
assign a BUY rating on the stock valuing the Company 40x on FY17E EPS of INR 25 to
arrive at target price of INR 1,000 proposing an upside of ~14%.
Institutional Research
Growing strong
distribution channel
with a total coverage
of 8 million stores
approx. leading to
higher revenues
172,063
152,330
114,406
122,344
135,378
16%
14%
14%
12%
FY13
FY14
8%
6%
4%
2%
0%
FY12
FY13
FY14
FY15E
FY16E
FY17E
FY10
FY11
S&D
FY12
S&D
12
16%
10.0
10
14%
12%
14.4%
14.4%
10%
8.8%
6
4
13%
9%
10%
96,771
13%
12%
3.7
7.8%
8%
3.7
2.7
2.2
2.1
6.0%
6%
4%
2%
0
India
Malaysia Philippines
USA
China
Thailand
0%
Lifebuoy
Lux
Santoor
Dettol
Godrej No.
1
Source: IBEF
4 April 2015 | Page 63
120,000
27%
89,020
74,288
27%
27%
98,828
100,000
80,000
PP segment to
register a pickup in
growth on back of
higher spending on
premium products
from growing
disposable income
80,927
26%
65,098
26%
25%
60,000
26%
40,000
25%
20,000
25%
25%
25%
24%
0
FY12
FY13
FY14
FY15E
FY16E
FY10
FY17E
FY11
FY12
FY13
FY14
PP
PP
Beverages Segment
HUL offers tea and coffee brands under its beverages segment and has witnessed a
growth of 12% in FY13 and 16% in FY14. The segment will see a growth of 9-10%by the
end of FY15 on back of high competition from the small players like Wagh Bakri, Society
Tea etc. and the tea price growth remained muted in first 3 quarters of FY15. We expect
an average growth of 14% in FY16 on back of pick up from a lower base of 9-10%
expected in FY15.
Exhibit 7: Total Revenues
45,000
20%
38,452
40,000
33,534
35,000
29,403
30,000
25,000
22,246
15,000
8%
6%
10,000
4%
5,000
2%
0%
0
FY13
FY14
FY15E
Beverages
Source: Company and Bonanza Research
Institutional Research
15%
FY10
FY11
16%
14%
10%
20,000
FY12
18%
15%
14%
12%
25,780
19,824
18%
16%
FY16E
FY17E
FY12
FY13
FY14
Beverages
Source: Bloomberg and Bonanza Research
25,000
20,636
4%
18,628
20,000
13,991
15,000
15,330
4%
4%
3%
16,832
3%
2%
3%
2%
2%
10,000
2%
1%
5,000
1%
1%
0
FY12
FY13
FY14
FY15E
FY16E
FY17E
0%
FY10
FY11
Food
FY12
FY13
FY14
Foods
4,500,000
4,000,000
4,000,000
7,000,000
3,500,000
6,400,000
6,000,000
3,000,000
CAGR - 28%
5,000,000
2,500,000
4,000,000
2,000,000
3,000,000
1,500,000
1,000,000
8,000,000
8,000,000
900,000
2,000,000
1,000,000
500,000
0
0
FY09
Institutional Research
FY15E
FY13
FY15E
CY12
Cold Cream
Antiseptic
Cream
Fairness Cream
Talcum Powder
Shampoo
Toothpaste
Hair Oil
Detergent Bars
Toilet Soaps
120
100
80
60
40
20
0
Washing
Powder
CY13
Source: IBEF
F&B segment
registering a healthy
growth from past 5
quarters and
expected to grow by
15% in FY14-FY16E.
13%
27%
47%
25%
62%
26%
Knorr
Maggi
Ching
Maggi
Kissan
Others
12%
8%
38%
6%
16%
20%
Amul
Kwality Walls
Ceam bell
Mother Dairy
Vadilal
Beverages
Kissan Jam
BRU Coffee
Kissan Ketchup
Modern Bread
Lipton
Institutional Research
7%
7%
6%
6%
5%
4%
6%
6%
5% 5%
5% 5%
4%
5%
4%
3%
3%
3%
3%
2%
1%
0%
Q1FY14
Q2FY14
Q3FY14
Q4FY14
Volume Growth
Q1FY15
Q2FY15
Q3FY15
Price Growth
Financial Charts
Exhibit 19: Profitability
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
15%
15%
16%
15%
14%
17%
15%
17%
15%
16%
13%
12%
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
FY12
FY13
FY14
EBITDA Margin
Source: Company and Bonanza Research
Institutional Research
FY15E
FY16E
PAT Margin
FY17E
0
FY12
FY13
Sales (mn)
FY14
FY15E
EBITDA (mn)
FY16E
FY17E
PAT (mn)
1,400
1,200
1,000
800
600
400
200
Mar 31 2008
Jun 30 2008
Sep 30 2008
Dec 31 2008
Mar 31 2009
Jun 30 2009
Sep 30 2009
Dec 31 2009
Mar 31 2010
Jun 30 2010
Sep 30 2010
Dec 31 2010
Mar 31 2011
Jun 30 2011
Sep 30 2011
Dec 31 2011
Mar 31 2012
Jun 30 2012
Sep 30 2012
Dec 31 2012
Mar 31 2013
Jun 30 2013
Sep 30 2013
Dec 31 2013
Mar 31 2014
Jun 30 2014
Sep 30 2014
Dec 31 2014
Mar 28 2015*
Jun 26 2015*
Px = 747.84 @ p/e of 41
Px = 674.88 @ p/e of 37
Px = 601.92 @ p/e of 33
Px = 528.96 @ p/e of 29
Px = 456 @ p/e of 25
Institutional Research
Financials
Ratio Analysis
P&L
Particulars (mn)
Sales
Less : Excise Duty
Rate of Excise Duty
Net Sales
Cost of Materials
Change in Inventory
Operating & Other expenses
Total Operating Expenses
EBITDA
Depreciation
EBIT
Other exceptional Income
Interest Expenses
Other income
EBT
Tax
Profit After tax
No. of Shares
EPS
FY14
295,579
15,388
5
280,191
122,624
(1,664)
114,790
235,750
44,442
2,595
41,847
2,287
360
6,511
50,284
11,609
38,675
2,162
18
FY15E
329,501
17,154
5
312,348
133,448
FY16E
FY17E
371,096 421,913
19,319
21,965
5
5
351,777 399,948
150,294 174,333
124,939
258,387
53,961
2,802
51,159
1,766
252
6,999
59,673
13,777
45,896
2,162
21
140,711
291,005
60,772
3,025
57,747
1,766
161,284
335,617
64,331
3,261
61,071
1,766
6,999
66,513
15,356
51,157
2,162
24
6,999
69,836
16,123
53,713
2,162
25
Ratio Analysis
FY14
FY15E
FY16E
FY17E
EBITDA Margin
16%
17%
17%
16%
PAT Margin
14%
15%
15%
13%
EV/EBITDA
36
37
32
31
Debt / Equity
0.0
0.0
0.0
0.0
120%
99%
83%
73%
ROE
Balance Sheet
Cash Flow
Particulars (mn)
FY14
FY15E
FY16E
FY17E
Share Capital
2,163
2,163
2,163
2,163
44,051
59,511
71,554
Share warrants
Reserves and Surplus
Deferred tax Liability
427
30,181
(1,617)
2,788
Total
33,941
46,213
61,673
73,717
Fixed Assets
44,429
47,967
51,786
55,825
Less : Depriciation
20,208
23,010
26,035
29,295
Net Block
24,221
24,957
25,752
26,529
3,121
30,941
30,941
30,941
30,941
6,055
7,121
8,020
8,258
63,945
85,413
111,763
137,483
Inventories
27,475
32,251
36,322
41,296
8,164
9,592
10,803
12,283
22,210
38,047
58,418
76,833
2,401
2,751
3,099
3,523
3,695
2,771
3,121
3,549
94,425
102,219
114,803
129,495
(30,480)
(16,806)
(3,040)
7,988
33,941
46,213
61,673
73,717
84
Sundry debtors
Cash and Bank Balances
Total
Particulars (mn)
FY14
FY15E
FY16E
FY17E
50,284
59,673
66,513
69,836
Adjustments for:
(2,707)
3,053
3,025
47,577
62,726
69,538
4,788
665
6,605
55,953
63,390
76,142
(12,785)
(13,777)
(16)
49,614
60,787
64,362
(1,483)
(4,719)
(4,277)
(32,278)
15,853
3,261
73,097
7,388
80,485
(15,356) (16,123)
(35,697) (41,669)
20,371
18,416
Institutional Research
Company Profile
Hindustan Unilever operates in five segments: S&D, PP, beverages, packaged foods,
and others. S&D segment include soaps, detergent bars, detergent powders, detergent
liquids, scourers. PP segment include products in the categories of skin care, hair care,
oral care, colour cosmetics and deodorants. The foods and beverages portfolio of the
Company includes tea, coffee, processed foods, frozen desserts, ice creams, bakery
products and out of home operations, including Bru world cafe. The Packaged foods
segment of the company includes culinary products such as jams, ketchups and soups,
soupy noodles and meal makers; branded staples (atta and salt; bakery products, and
frozen desserts/ice creams. Others segment includes exports, chemicals, water business
and infant care products. HUL is the largest FMCG Company in India after ITC with a
total revenues of more than INR 3,20,000 mn. The company has a strong brand
positioning across various segments and a strong distribution network close to 7 million
stores across India to cater to the large population of the country. The company is a
leader in Soap & Detergent Segment with its popular brands Lifebuoy, LUX, Surf Excel,
RIN and Active Wheel. In Skin Care segment Fair & Lovely is a leading brand with
highest market share.
Exhibit 22: Segmental contribution in revenues
60%
50%
40%
30%
20%
10%
0%
Soaps and
Detergents
Personal Products
FY12
Beverages
FY13
Packaged Foods
Others
FY14
PP Segment
Lux
Lakme
Lifebuoy
Ponds
Axe
Rexona
Modern Bread
Knorr Soup, Pasta, Manchurian
etc.
Annapurna - Flour, Salt
Dove
Tresemme
Breeze
SunSilk
Pears
BRU Coffee
Clinic Plus
Vim
Aviance
Rin
Lipton
Tigi
Liril
Magic
Sunlight
Clear
Surf Excel
Elle 18
Active Wheel
Vaseline
Comfort
Source: Company, Bonanza Research
Institutional Research
Head of Equity
Yogesh Nagaonkar
kamal@bonanzaonline.com
022-306 3514
n.yogesh@bonanzaonline.com
Institutional Dealing
Hareesh Bohra
Sales Trader
022-3086 3786
hareeshbohra@bonanzaonline.com
Manoj Pawar
Sales Trader
022-3086 3982
manoj.p@bonanzaonline.com
Nitesh Jalan
Sales Trader
022-3086 3758
nitesh.j@bonanzaonline.com
Corporate Office :Plot No. M-2, Cama Industrial Estate, Walbhat Road, Behind The Hub Goregaon (E), Mumbai - 400 063. Tel.: 022-67605500 / 600
Head Office :2/2 A, First Floor, Lakshmi Insurance Building, Asaf Ali Road, New Delhi - 110 002. Tel.: 011-30181290 / 94
Web: www.bonanzaonline.com
Institutional Research