FMCGQ206 ISec

FMCG
Q3FY06 Q4FY06
Q2FY06 Q1FY06
Results Preview
Anand Shah
+91 22 5637 7230
anand_shah@isecltd.com
FMCG – Q2FY06 Results Preview ICICI Securities
TABLE OF CONTENTS
Sector preview ........................................................................................ FMCG - 1
Asian Paints ......................................................................................... FMCG - 5
Britannia Industries .............................................................................. FMCG - 7
Colgate-Palmolive................................................................................ FMCG - 9
GlaxoSmithKline Consumer Healthcare .............................................. FMCG - 11
Godrej Consumer Products ................................................................. FMCG - 13
Goodlass Nerolac Paints ..................................................................... FMCG - 15
Hindustan Lever................................................................................... FMCG - 17
ITC ....................................................................................................... FMCG - 19
Nestlé India .......................................................................................... FMCG - 21
Procter & Gamble ................................................................................ FMCG - 23
Tata Tea .............................................................................................. FMCG - 25
Prices as on October 7, 2005

Equity Research
October 7, 2005
FMCG
On the growth path
The FMCG sector is set to register acceleration in sales growth and improvement
Top picks in profitability in Q2FY06. Rising rural demand, reversal of downtrading,
Nestle
improvement in realisations and higher fiscal incentives augur well for the
GSK Consumer
industry. The strong performance of the sector broadly seems to discount the
improvement in outlook. Our top picks are Nestle and GSK Consumer.
f Sales growth to accelerate. The consistent growth in the economy over the past
two years now seems to be leading to a strong growth in consumption demand for
the FMCG industry. While growth was primarily led by the urban markets
previously, the situation now has transformed significantly; rural markets, too, are
witnessing a revival in demand. Further, with a shift in share of wallet towards
aspirational products now having largely played out, the earlier trend of downtrading
has reversed. Interestingly, the price increases affected by most companies have
been easily accepted by the consumer without any resistance and adverse impact
on volumes. We see acceleration in sales growth, with the sales of companies in
our universe growing 14% YoY in Q2FY06E and eight out of eleven companies
likely to register double-digit sales growth.
f Profitability to improve. Along with a strong revenue growth, there would be a
significant improvement in the profitability of the industry due to the ability to pass
on the cost inflation, improvement in revenue mix in favour of high value products,
higher fiscal benefits from investment in tax-exempt locations and the competitive
edge versus the unorganised segment after implementation of VAT. We expect
margins of the branded business to expand for all companies under our universe.
The overall operating profit and net profit for the i-SEC universe is likely to grow
18% YoY and 19% respectively in Q2FY06E. Godrej (profit up 55%), Colgate (up
45%) and GSK Consumer (up 39%) are expected to register strongest profit growth.
f Strong performance of the sector largely discounts improved outlook. Normal
monsoon, strong economic growth and improvement in consumer confidence augur
well for stronger consumer demand and improved profitability for the sector going
ahead. In line with the improvement in the environment for consumer companies,
the BSE FMCG Index has moved up by 37% over the past six months and has
marginally outperformed the BSE Sensex. The valuations for the FMCG sector
(barring HLL) now are significantly higher than historic levels and seem to largely
discount the improvement in outlook. Our top picks in the sector are Nestle and
GSK Consumer.
Company Sales EBITDA PAT
% Chg % Chg % Chg
(Rs mn) JAS ’05* (YoY) (QoQ) JAS ’05* (YoY) (QoQ) JAS ’05* (YoY) (QoQ)
ITC 21,529 23.9 (5.0) 8,431 20.8 2.0 5,837 20.2 8.0
HLL 27,018 11.5 (5.8) 4,035 12.1 7.1 3,145 17.0 4.7
Nestle 6,730 12.9 3.1 1,425 26.0 3.3 844 28.1 (2.3)
Anand Shah Asian Paints 6,413 20.0 25.6 980 21.0 34.6 633 28.5 43.3
anand_shah@isecltd.com GSK Consumer 2,558 8.9 5.3 536 20.3 8.9 313 38.7 7.6
+91 22 5637 7230 * July – September ’05
FMCG - 1
FMCG ICICI Securities
Chart 1: Retail sales audit suggests slight deceleration in growth in July-Aug ’05
50 12
Sales (LHS) YoY Grow th
10
48
8
46 6
(Rs bn)
4
(%)
44 2
0
42
(2)
40 (4)
Nov-03
Jan-04
Mar-04
May-04
Jul-04
Nov-04
Jan-05
Mar-05
May-05
Jul-05
Sep-04
Source: ACNielsen
Chart 2: Most large categories show healthy growth

20
Washing Pow der Shampoos
15 Biscuits
Skin Creams
10
(%)
5
ROCP Toothpaste
Toilet Soaps Beverages
0
Detergent cakes
(5)
Packaged Tea
(10)
Source: ACNielsen
Note: Sales growth for the month of August 2005
Chart 3: Most companies likely to register margin expansion
45
Q2FY05 Q2FY06E
40
35
30
25
(%)
20
15
10
5
0
ITC
Tata Tea
Consumer
P&G
Nestle
Colgate
Godrje
HLL
Industry
Goodlass
Britannia
Asian Paints
GSK
Source: i-SEC Research
FMCG - 2
FMCG ICICI Securities
Table 1: Comparative metrics
(Rs mn)
Company Sales EBITDA Recurring PAT
% chg. % chg. % chg.
JAS ‘05* YoY QoQ JAS ‘05* YoY QoQ JAS ‘05* YoY QoQ
Asian Paints 6,413 20.0 25.6 980 21.0 34.6 633 28.5 43.3
Britannia 4,570 7.0 12.7 610 10.5 5.2 405 (17.9) 6.6
Colgate 2,752 12.0 6.5 541 22.3 30.1 391 45.1 18.8
Godrej Consumer 1,660 23.7 (1.0) 327 51.0 (1.2) 270 55.2 (0.3)
GSK Consumer 2,558 8.9 5.3 536 20.3 8.9 313 38.7 7.6
Goodlass Nerolac 2,686 17.0 18.5 471 23.0 27.4 304 4.2 40.6
HLL 27,018 11.5 (5.8) 4,035 12.1 7.1 3,145 17.0 4.7
ITC 21,529 23.9 (5.0) 8,431 20.8 2.0 5,837 20.2 8.0
Nestle 6,730 12.9 3.1 1,425 26.0 3.3 844 28.1 (2.3)
PGHH 1,867 31.4 8.7 416 13.4 63.4 301 17.8 83.0
Tata Tea 7,409 (2.0) 3.4 1,650 7.7 19.4 949 11.3 51.8
Total 85,191 14.2 0.4 19,421 18.0 8.1 13,393 18.9 11.7
Source: i-SEC Research; * Jul-Sep ’05
Chart 4: BSE FMCG Index marginally outperforms the Sensex

160
BSE FMCG Index BSE Sensex
150
140
130
120
110
100
90
80
70
Mar-04
Jun-04
Jul-04
Oct-04
Nov-04
Jan-05
Feb-05
May-05
Jul-05
Oct-05
Apr-04
Aug-04
Apr-05
Aug-05
Source: CMIE
FMCG - 3
FMCG - 4
FMCG
Earnings watch
FMCG
Asian Paints BUY Component of: MSCI India
Price (Rs) 519 MCap (Rs mn) 49,790 FY03 33.0 25.4 19.7 1.4 31.2 24.2 24.2 14.5 15,594 2,588 1,509 1,420 559 15.7 16.6 34.3 25.8 27.7
52 week Hi/Lo (Rs) 533/289 MCap (US$ mn) 1,123.9 FY04 33.9 25.6 20.0 1.6 (2.8) 4.1 (2.1) 10.7 17,263 2,534 1,467 1,478 913 15.3 14.7 29.2 23.3 16.4
Free float (%) 57.2 *BVPS (Rs) 55 FY05 28.3 22.2 17.6 1.8 20.0 17.6 13.2 11.9 19,322 2,867 1,760 1,738 1,020 18.4 14.8 31.9 26.6 13.3
Shares out (mn) 96.0 *Returns (%): 1 mo 5.8 FY06E 23.0 18.4 14.5 2.4 23.1 24.7 20.9 18.1 22,828 3,466 2,175 2,175 1,066 22.6 15.2 35.4 30.6 8.6
Year ending March 12 mo 68.7 FY07E 19.9 16.1 12.3 2.8 15.5 15.5 16.1 13.1 25,816 4,025 2,513 2,513 1,832 26.1 15.6 35.8 32.8 cash
Britannia BUY Component of: MSCI India

Price (Rs) 1225 MCap (Rs mn) 29,278 FY03 33.0 25.9 19.0 0.7 34.5 (50.8) 11.2 (7.3) 12,958 1,471 963 992 811 37.2 11.4 27.0 19.3 cash
52 week Hi/Lo (Rs) 1453/620 MCap (US$ mn) 660.9 FY04 27.1 22.6 16.2 0.9 21.7 23.6 15.7 11.1 14,396 1,702 1,136 1,188 965 45.2 11.8 30.3 24.5 cash
Free float (%) 51.0 *BVPS (Rs) 153 FY05 21.4 18.8 15.1 1.1 26.7 31.6 8.1 10.3 15,875 1,840 1,370 1,489 315 57.3 11.6 34.7 31.9 cash
Shares out (mn) 23.9 *Returns (%): 1 mo 1.6 FY06E 19.1 16.5 12.8 2.0 12.1 (4.3) 13.6 8.2 17,185 2,091 1,536 1,425 1,242 64.2 12.2 34.7 32.9 cash
Colgate-Palmolive BUY Component of: MSCI India

Price (Rs) 257 MCap (Rs mn) 35,013 FY03 39.5 32.4 22.9 1.7 9.7 27.0 27.0 (8.6) 10,178 1,420 887 887 1,600 6.5 14.0 34.0 30.9 cash
52 week Hi/Lo (Rs) 265/143 MCap (US$ mn) 790.4 FY04 35.1 29.7 22.0 2.3 12.4 21.8 3.1 (7.7) 9,392 1,464 997 1,080 911 7.3 15.6 38.4 37.1 cash
Free float (%) 49.0 *BVPS (Rs) 18 FY05 28.8 25.4 18.4 2.7 22.0 4.9 18.7 2.7 9,642 1,739 1,216 1,133 712 8.9 18.0 48.0 48.4 cash
Shares out (mn) 136.0 *Returns (%): 1 mo 1.1 FY06E 21.9 19.1 15.4 3.6 31.4 41.1 17.2 12.7 10,864 2,037 1,599 1,599 1,683 11.8 18.7 59.0 59.6 cash
GSK Consumer BUY Component of: MSCI India

Price (Rs) 520 MCap (Rs mn) 21,892 CY02 26.5 18.2 12.7 1.3 (14.9) (20.7) (15.0) (12.5) 7,556 1,677 891 850 1,167 19.6 22.2 19.8 18.1 cash
52 week Hi/Lo (Rs) 530/248 MCap (US$ mn) 494.2 CY03 36.3 20.4 15.0 1.3 (27.0) (10.2) (20.1) 6.2 8,028 1,339 650 763 1,059 14.3 16.7 13.5 13.4 cash
Free float (%) 57.0 *BVPS (Rs) 107 CY04 30.5 19.1 12.9 1.3 19.2 1.5 13.5 8.1 8,680 1,520 775 775 866 17.1 17.5 15.2 15.0 cash
Shares out (mn) 42.1 *Returns (%): 1 mo 20.9 CY05E 18.6 13.8 10.3 1.9 63.5 63.5 26.9 11.4 9,666 1,929 1,175 1,175 1,084 27.9 20.0 23.4 21.9 cash
Year ending December 12 mo 99.0 CY06E 14.6 11.5 8.1 2.4 27.5 27.5 21.3 11.0 10,730 2,339 1,497 1,497 1,227 35.6 21.8 28.8 26.9 cash
Godrej Consumer BUY Not a component of key indices

Price (Rs) 469 MCap (Rs mn) 26,716 FY03 50.4 43.2 33.4 1.7 31.0 31.0 6.4 2.4 4,760 803 536 536 635 9.3 16.9 108.6 76.1 24.9
52 week Hi/Lo (Rs) 501/201 MCap (US$ mn) 603.1 FY04 43.3 37.6 32.2 1.9 16.5 22.7 3.9 3.3 4,916 834 616 649 563 10.8 17.0 140.1 89.5 42.1
Free float (%) 33.0 *BVPS (Rs) 7 FY05 32.0 28.4 26.6 2.5 35.3 38.8 20.4 14.5 5,627 1,005 829 896 784 14.6 17.9 179.8 123.3 10.2
Shares out (mn) 57.0 *Returns (%): 1 mo 4.6 FY06E 23.7 21.5 20.2 3.3 35.0 25.0 31.8 17.4 6,604 1,324 1,112 1,112 1,046 19.8 20.0 227.4 182.0 9.4
Goodlass Nerolac BUY Not a component of key indices

Price (Rs) 730 MCap (Rs mn) 18,622 FY03 46.7 29.1 (0.4) 0.7 45.6 45.6 31.5 11.1 6,534 730 398 398 254 15.6 11.2 18.5 15.1 cash
52 week Hi/Lo (Rs) 770/265 MCap (US$ mn) 420 FY04 32.1 23.3 (0.8) 1.0 45.5 45.5 40.1 16.4 7,605 1,023 580 580 527 22.7 13.5 23.5 19.3 cash
Free float (%) 35.5 *BVPS (Rs) 252 FY05P 20.8 17.0 (0.5) 1.4 54.5 56.2 32.7 15.7 8,795 1,358 876 918 (96) 35.1 15.4 29.6 24.7 cash
Shares out (mn) 25.51 *Returns (%): 1 mo 0.5 FY06E 18.2 14.1 (0.8) 2.1 13.9 12.5 20.0 14.0 10,026 1,630 906 906 808 40.0 16.3 25.8 21.9 cash
Year ending March 12 mo 72.5 FY07E 15.7 12.5 (0.3) 2.5 16.0 16.3 15.5 13.0 11,330 1,883 1,094 1,094 1,051 46.4 16.6 27.1 23.2 cash
Hindustan Lever HOLD Component of: MSCI India, BSE Sensex, Nifty
Price (Rs) 180 MCap (Rs mn) 396,774 CY02 23.1 21.4 17.7 3.1 17.6 25.2 22.7 1.4 100,588 20,598 17,173 17,557 14,294 7.8 20.5 51.3 54.5 Cash
52 week Hi/Lo (Rs) 188/120 MCap (US$ mn) 8,957 CY03 23.3 21.7 18.3 4.0 (0.8) 0.9 1.6 2.2 102,754 20,919 17,034 17,718 13,207 7.7 20.4 58.8 50.0 Cash
Free float (%) 48.4 *BVPS (Rs) 9.4 CY04 35.9 32.3 25.7 2.8 (35.1) (32.4) (28.4) (2.0) 100,653 14,971 11,059 11,973 8,763 5.0 14.9 52.3 35.1 Cash
Shares out (mn) 2201.2 *Returns (%): 1 mo 8.3 CY05E 30.7 27.9 23.6 2.8 16.7 (22.2) 8.2 8.7 109,395 16,199 12,907 12,907 12,446 5.9 14.8 61.2 49.4 Cash
Year ending December 12 mo 40.1 CY06E 25.4 23.3 19.4 3.1 21.2 21.2 21.2 7.3 117,392 19,637 15,638 15,638 13,481 7.1 16.7 70.4 77.5 Cash
ITC BUY Component of: MSCI India, BSE Sensex, Nifty

Price (Rs) 126 MCap (Rs mn) 471,917 FY03 33.9 29.0 21.0 0.8 18.3 15.3 14.9 15.9 58,658 21,941 13,826 13,714 11,565 3.7 37.4 28.6 27.4 6.7
52 week Hi/Lo (Rs) 149/69 MCap (US$ mn) 10,653 FY04 29.5 25.6 18.7 1.1 14.9 14.9 9.7 10.3 64,704 24,063 15,897 15,928 12,677 4.3 37.2 27.3 26.7 Cash
Free float (%) 100.0 *BVPS (Rs) 254 FY05 25.7 22.0 15.8 1.6 14.8 14.8 16.2 18.1 76,395 27,960 18,375 21,918 5,738 4.9 36.6 25.9 24.9 Cash
Shares out (mn) 3735.0 *Returns (%): 1 mo 3.9 FY06E 20.2 17.5 12.5 2.1 27.6 27.6 23.2 16.5 88,990 34,438 23,475 23,475 16,879 6.3 38.7 28.8 27.3 Cash
Year ending March 12 mo 69.9 FY07E 17.8 15.4 11.3 2.5 13.3 13.3 13.6 13.5 101,019 39,130 26,635 26,635 13,377 7.1 38.7 30.3 29.0 Cash
Nestle India BUY Component of: MSCI India, BSE Sensex

Price (Rs) 867 MCap (Rs mn) 83,405 CY02 34.3 28.5 21.0 2.1 26.5 19.5 26.9 6.4 19,363 3,990 2,437 2,069 2,882 25.3 20.6 87.9 63.7 Cash
52 week Hi/Lo (Rs) 920/525 MCap (US$ mn) 1,883 CY03 30.3 26.0 18.6 2.3 13.0 27.1 11.4 11.3 21,545 4,447 2,754 2,631 2,934 28.6 20.6 88.2 77.5 Cash
Free float (%) 41.3 *BVPS (Rs) 35 CY04 30.8 26.1 18.1 2.8 (1.4) (4.2) 1.4 3.4 22,276 4,510 2,715 2,519 3,660 28.2 20.2 83.0 80.4 Cash
Shares out (mn) 96.2 *Returns (%): 1 mo (0.2) CY05E 24.8 21.2 14.8 3.1 24.4 27.0 21.6 11.9 24,934 5,483 3,377 3,198 3,325 35.0 22.0 99.2 97.8 Cash
Year ending December 12 mo 56.6 CY06E 20.9 18.3 13.0 3.6 18.2 19.5 13.2 12.0 27,933 6,207 3,991 3,821 4,118 41.4 22.2 105.2 104.2 Cash
P&G Hygiene BUY Not a component of key indices

Price (Rs) 800 MCap (Rs mn) 25,922 FY03 31.0 26.9 21.0 1.7 9.6 (7.4) 2.7 7.2 4,342 1,138 836 749 658 25.8 26.2 37.3 38.0 Cash
ICICI Securities
52 week Hi/Lo (Rs) 888/446 MCap (US$ mn) 585.1 FY04 26.7 23.9 17.6 2.5 16.3 23.1 17.4 31.8 5,722 1,336 973 922 862 30.0 23.4 40.6 41.8 Cash
Free float (%) 31.0 *BVPS (Rs) 77 FY05P 27.4 24.8 18.0 2.7 (2.7) 12.7 (2.3) 20.8 6,909 1,305 946 1,038 512 29.2 18.9 36.3 37.2 Cash
Shares out (mn) 32.4 *Returns (%): 1 mo (4.8) FY06E 23.0 20.6 14.8 3.1 19.5 8.9 19.9 14.3 7,900 1,565 1,131 1,131 1,006 34.8 19.8 39.9 40.7 Cash
Year ending June 12 mo 62.9 FY07E 20.1 18.2 12.4 3.5 14.4 14.4 16.5 12.7 8,905 1,823 1,294 1,294 1,207 39.9 20.5 42.1 42.7 Cash
Tata Tea BUY Component of: MSCI India, Nifty

Price (Rs) 831 MCap (Rs mn) 46,711 FY03 48.1 23.9 16.8 0.8 9.7 (13.6) 2.1 8.7 32,922 3,822 1,065 833 (246) 17.3 11.6 10.0 6.5 161.2
52 week Hi/Lo (Rs) 879/381 MCap (US$ mn) 1,054.4 FY04 28.8 18.0 13.9 1.0 67.2 146.0 18.9 (7.4) 30,496 4,543 1,773 2,050 1,001 28.9 14.9 14.9 8.5 128.0
Free float (%) 70.0 *BVPS (Rs) 229 FY05 19.4 14.2 12.1 1.2 48.1 3.2 14.3 (0.3) 30,413 5,192 2,519 2,115 741 42.8 17.1 18.4 10.5 111.5
Shares out (mn) 56.2 *Returns (%): 1 mo (1.9) FY06E 17.0 12.9 10.2 1.4 14.4 36.9 7.0 3.3 31,407 5,557 2,896 2,896 3,926 48.9 17.7 18.2 10.7 56.0
Year ending March 12 mo 96.0 FY07E 15.8 12.6 9.1 1.7 7.5 2.1 6.8 5.8 33,218 5,937 2,956 2,956 3,387 52.6 17.9 16.3 10.4 39.5
Source: i-SEC Research; BVPS - Book Value per share; Returns - Absolute Returns
Equity Research
October 7, 2005
Asian Paints BUY
FMCG Shades of happiness Rs519

Asian Paints (APL) is likely to register a robust 20% YoY topline growth in
Q2FY06E based on strong industry growth, the customary pre-festive season
Shareholding pattern sales and impact of price hikes effected earlier. Despite escalation of input prices,
Dec Mar Jun
‘04 ‘05 ‘05 we expect the company’s margins to be sustained and net profit to grow 29%
Promoters 42.9 42.9 42.9 YoY. APL is all set to register highest sales growth in the decade in FY06. On the
Institutional
investors 35.6 36.5 36.8 back of a strong performance, premium valuations of the stock are likely to
MFs and UTI 3.2 2.6 2.7
Insurance Cos. 12.9 12.8 12.2
continue. BUY.
FIIs 19.6 21.2 21.9
Others 21.5 20.6 20.4 f Robust revenue growth. APL, the market leader in Indian decorative paints, is
Source: CMIE likely to be the biggest beneficiary of the uptrend in the segment. We expect APL’s
sales to grow 20% YoY in Q2FY06E on the back of about 6% YoY higher
realisations and a part of the customary pre-festive season sales during the quarter.
It must be noted that a large part of festive season sales in the past year had been
reflected in the December quarter as Diwali was celebrated in mid-November.
Price chart f Margins to be sustained despite escalation in input prices. The price increase
550
of 1.25% effected by the company in June ’05 would not offset the increase in input
prices completely. However, improvement in efficiencies and logistics benefits from
500
the new unit in South India would help the company sustain operating margins. We
450
expect the operating profits to grow 21% YoY. During the quarter, the company
(Rs)
400
would receive dividend from its strategic investment in ICI India. With a decline in
350
effective tax rate, the net profit is likely to grow 29% YoY to Rs633mn.
300
250 f APL to register highest revenue growth in the decade in FY06E. The period of
correction in margins for APL seems to be over. Given the favourable dynamics for
Oct-04
Dec-04
Feb-05
May-05
Jul-05
Oct-05
the paint industry, Asian Paints is likely to record its highest-ever growth in the past
decade in FY06E.
f Premium valuations to continue. On account of the robust performance of the
company and a favourable outlook, the stock is likely to sustain rich valuations.
Quarterly estimates
(Rs mn, year ending March 31)
Q2FY06E Q2FY05 YoY (%) QoQ (%) YTD FY06* YTD FY05* YoY (%)
Revenues 6,413 5,344 20.0 25.6 5,106 4,018 27.1
EBITDA 980 810 21.0 34.6 728 616 18.1
PBT 938 777 20.6 39.5 672 530 26.7
PAT 633 493 28.5 43.3 442 335 32.0
Source: Company data, i-SEC Research; * April to June
Market Cap Rs49.8bn/US$1.1bn Year to March FY05 FY06E FY07E FY08E

Shares Outstanding (mn) 96.0 Revenue (Rs mn) 19,322 22,828 25,816 29,252
FII (%) 21.9 Net Income (Rs mn) 1,760 2,175 2,513 2,907
Daily Volume (US$'000) 600 EPS (Rs) 18.4 22.6 26.1 30.2
Absolute Return 3m (%) 20.8 % Chg YoY 20.0 23.1 15.5 15.7
Anand Shah Absolute Return 12m (%) 68.7 CEPS (Rs) 23.3 28.2 32.3 36.7
anand_shah@isecltd.com Sensex Return 3m (%) 17.7 RoCE (%) 26.6 30.6 32.8 34.6
+91 22 5637 7230 Sensex Return 12m (%) 47.0 RoE (%) 31.9 35.4 35.8 36.5
FMCG - 5
Asian Paints ICICI Securities
Financial summary (Standalone)
Table 1: Profit and Loss Statement Table 3: Cash Flow Statement
(Rs mn, year ending March 31) (Rs mn, year ending March 31)
FY05 FY06E FY07E FY08E FY05 FY06E FY07E FY08E
Operating Income (Sales) 19,322 22,828 25,816 29,252 Operating Cash flow 2,284 2,371 2,768 3,179
of which Working Capital changes (545) (38) (186) (277)
Exports 140 202 202 202 Capital Commitments (719) (1,267) (750) (850)
Domestic 19,182 22,626 25,614 29,050 Net Operating FCF 1,020 1,066 1,832 2,052
Operating Expenses 16,454 19,362 21,790 24,626 Investing Activities 278 370 371 384
EBITDA 2,867 3,466 4,025 4,626 Issue of Share Capital 0 4 0 0
% margin 14.8 15.2 15.6 15.8 Inc(Dec) in Borrowings 134 (239) (500) 0
Depreciation & Amortisation 476 536 596 626 Dividend paid (976) (1,209) (1,444) (1,743)
Gross Interest 28 33 33 33 Extraordinary Items (33) 0 0 0
Other Income 378 370 371 384 Chg. in Cash & Bank (35) (8) 259 694
Recurring PBT 2,741 3,267 3,767 4,351 Source: Company data, i-SEC Research
Add: Extraordinaries (33) 0 0 0
Less: Taxes 970 1,092 1,254 1,444
- Current tax 988 1,062 1,224 1,414
- Deferred tax (18) 30 30 30
Table 4: Key Ratios
Net Income (Reported) 1,738 2,175 2,513 2,907 (Year ending March 31)
Recurring Net Income 1,760 2,175 2,513 2,907 FY05 FY06E FY07E FY08E
Source: Company data, i-SEC Research Per Share Data (Rs)
EPS(Basic Recurring) 18.4 22.6 26.1 30.2
Table 2: Balance Sheet Diluted Recurring EPS 18.4 22.6 26.1 30.2
Diluted Recurring CEPS 23.3 28.2 32.3 36.7
(Rs mn, year ending March 31) Dividend per share 9.5 12.4 14.4 18.1
FY05 FY06E FY07E FY08E Book Value 59.7 68.0 78.0 87.7
Assets
Total Current Assets 5,925 6,159 6,917 8,147 Growth Ratios (% YoY)
of which Operating Income 11.9 18.1 13.1 13.3
Cash & cash equivalents 210 202 461 1,155 EBITDA 13.2 20.9 16.1 14.9
Current Liab. & Prov. 4,838 5,183 5,611 6,095 Recurring Net Income 20.0 23.6 15.5 15.7
Net Current Assets 1,087 976 1,306 2,052 Diluted Recurring EPS 20.0 23.1 15.5 15.7
Investments Diluted Recurring CEPS 14.9 20.8 14.7 13.6
of which 2,584 2,784 2,984 3,184
Strategic/Group 2,413 2,613 2,813 3,013 Operating Ratios (%)
Marketable 171 171 171 171 Raw Material / Sales 58.2 59.4 59.7 60.2
Net Fixed Assets* 3,195 3,726 3,680 3,704 SG&A / Sales 13.5 12.9 12.7 12.5
of which Other Income / PBT 13.8 11.3 9.9 8.8
Intangibles 49 39 31 25 Effective Tax Rate 35.4 33.4 33.3 33.2
Capital Work-in-Progress 83 50 50 50 NWC / Total Assets 12.8 10.3 10.6 10.0
Total Assets 6,866 7,487 7,971 8,940 Inventory (days) 80.6 80.5 71.1 65.4
Receivables (days) 23.5 22.7 23.4 23.5
Liabilities Payable (days) 55.2 53.9 50.7 48.1
Borrowings 839 600 100 100 Debt/Equity Ratio (%) 0.2 0.1 0.1 0.1
Deferred Tax Liability 305 335 365 395
Minority Interest 0 0 0 1 Profitability Ratios (%)
Equity Share Capital 959 963 963 963 Rec. Net Income Margins 8.9 9.4 9.6 9.8
Face value per share (Rs) 10 10 10 10 RoCE 26.6 30.6 32.8 34.6
Reserves & Surplus* 4,763 5,589 6,543 7,482 RoNW 31.9 35.4 35.8 36.5
Less: Misc. Exp. # 0 0 0 0 Dividend Payout 59.6 62.0 62.0 67.7
Net Worth 5,722 6,551 7,505 8,445 Source: Company data, i-SEC Research
Total Liabilities 6,866 7,487 7,971 8,940
Source: Company data, i-SEC Research
*excluding revaluation reserves; # = not written off
Table 5: Quarterly trends

Sep-04 Dec-04 Mar-05 Jun-05
Net sales 5,344 5,960 4,581 5,106
% growth (YoY) 8.1 32.4 12.7 27.1
EBITDA 810 902 766 728
Margin (%) 15.2 15.1 16.7 14.3
Other income# 95 56 91 60
Add: Extraordinaries (5) (11) 44 0
Adj. Net profit 493 512 523 442
FMCG - 6
Equity Research
October 7, 2005
Britannia Industries BUY
FMCG Crisp quarter Rs1,225

We expect Britannia’s sales growth to improve in Q2FY06E, after having
Shareholding pattern registered just 3% YoY in Q1FY06. Fiscal benefits from its new unit would offset
Dec Mar Jun
‘04 ‘05 ‘05 cost pressures; we expect OPM to expand marginally. The net profit, however, is
Promoters 51.0 51.0 51.0 likely to decline due to lower treasury income. With full benefits from the
Institutional
investors 25.9 26.8 27.1 Uttaranchal unit accruing by Q4FY06, profit growth is likely to be sustained.
MFs and UTI 5.7 3.6 2.7
Insurance Cos. 18.4 17.3 17.3 f Acceleration in sales growth. After witnessing a sales growth of mere 3% in
FIIs 1.8 5.9 7.1
Others 23.2 22.3 21.9 Q1FY06, we expect Britannia’s sales to grow 7% despite the higher base of
Source: BSE Q2FY05 (the highest ever quarterly sales growth for the company). However,
Britannia continues to lose market share to ITC, which is expanding its product
portfolio in biscuits. In July-August ’05, Britannia’s value share has dropped 400bps
YoY to 38.4%.
f Getting its act together. In mid-June ’05, the company relaunched Tiger, its largest
brand. This is likely to have helped the company’s sales momentum. Further, it is
Price chart planning a very specific and targeted foray into the rural markets. Besides, it plans
1,450
to launch at least two new products before end-October.
1,300 f Benefits from the new unit would offset cost pressures. Inspite of higher raw
1,150 material (wheat and sugar) costs and higher VAT rates (12.5% versus average
1,000 sales tax rate of 10%), margins are expected to improve 42bps YoY to 13.4% due to
(Rs)
850 excise duty benefits from the new plant in Uttaranchal as well as lower operating
700 expenses. Operating profits are estimated to grow 10.5%.
550 f Lower treasury income to depress net profit. While Q2FY05 had a large
Oct-04
Dec-04
Oct-05
Feb-05
May-05
Jul-05
contribution from treasury gains, amounting to Rs227mn, it is likely to be negligible

in Q2FY06E. Consequently, the net profit is likely to decline 18% YoY to Rs405mn.
With full benefits from the Uttaranchal unit expected to reflect in the coming
quarters, profit growth is likely to be maintained despite increasing competitive
pressures.
Quarterly estimates
Revenues 4,570 4,271 7.0 12.7 4,054 3,947 2.7
EBITDA 610 552 10.5 5.2 580 497 16.7
PBT 569 704 (19.1) 0.5 543 832 (34.7)
PAT 405 494 (17.9) 6.6 380 625 (39.2)
Source: Company data, i-SEC Research * April to June
Market Cap Rs29.3bn/US$661mn Year to March FY04 FY05 FY06E FY07E

FMCG - 7
Britannia Industries ICICI Securities
Financial summary
FY04 FY05 FY06E FY07E FY04 FY05 FY06E FY07E
Operating Income (Sales) 14,396 15,876 17,055 18,788 Operating Cash flow 927 1,044 1,502 1,801
of which Exports 52 58 62 69 Working Capital Changes 9 458 (148) (71)
of which Domestic 14,344 15,818 16,993 18,719 Capital Commitments 33 (42) (333) (150)
Operating Expenses 12,694 14,036 15,011 16,491 Free Cash Flow 969 1,460 1,021 1,579
EBITDA 1,702 1,839 2,044 2,296 Cash flow from Investing
% margins 11.8 11.6 12.0 12.2 Activities 401 (30) (217) (377)
Depreciation & Amortisation 224 190 217 228 Issue of Share Capital - - - -
Gross Interest 60 21 10 10 Buyback of shares (855) (792) - -
Other Income 346 392 283 323 Inc (Dec) in Borrowings (1,153) (330) (11) -
Recurring PBT 1,763 2,021 2,100 2,382 Dividend paid (263) (307) (381) (817)
Add: Extraordinaries 81 182 (150) (150) Extraordinary Items 81 182 (150) (150)
Less: Taxes 656 714 546 500 Chg. in Cash & Bank balance (637) 92 261 235
- Current tax 698 731 541 495 Source: Company data, i-SEC Research
- Deferred tax (42) (17) 5 5
Less: Minority Interest 0 0 0 0
Net Income (Reported) 1,188 1,488 1,404 1,732
Recurring Net Income 1,136 1,370 1,515 1,850
Note: We have considered treasury income of Rs200mn in FY04 and Rs300mn
in FY05 as non-recurring in nature as it pertained to booking of past unrealised
gains Table 4: Key Ratios
Table 2: Balance Sheet (Year ending March 31)
FY04 FY05 FY06E FY07E
(Rs mn, year ending March 31) Per Share Data (Rs)
FY04 FY05 FY06E FY07E EPS(Basic Recurring) 44.5 55.9 63.4 77.4
Assets Diluted Recurring EPS 45.2 57.4 63.4 77.4
Total Current Assets 2,268 2,644 2,778 3,209 Recurring Cash EPS 54.1 65.3 72.5 87.0
of which cash & cash Dividend per share (DPS) 10.8 14.0 30.0 60.0
equivalents 71 163 424 660 Book Value per share (BV) 153.2 171.3 195.9 200.0
Total Current Liabilities &
Provisions 2,154 3,033 3,203 4,153 Growth Ratios (% YoY)
Net Current Assets 114 (390) (425) (944) Operating Income 11.1 10.3 7.4 10.2
Investments 2,913 3,301 3,801 4,501 EBITDA 15.7 8.1 11.1 12.3
of which Recurring Net Income 18.0 20.7 10.6 22.1
Strategic/Group 750 716 716 716 Diluted Recurring EPS 21.7 26.8 10.6 22.1
Other Marketable 2,163 2,585 3,085 3,785 Diluted Recurring CEPS 14.7 20.6 11.0 20.0
Net Fixed Assets 1,283 1,277 1,392 1,315
of which Operating Ratios (%)
intangibles 274 273 298 281 Raw Material/Sales 53.3 56.7 58.1 58.4
Capital Work-in-Progress 9 317 50 50 SG&A/Sales 11.9 10.3 10.1 10.1
Total Assets 4,310 4,188 4,768 4,871 Other Income / PBT 19.6 19.4 13.5 13.6
Effective Tax Rate 35.6 32.4 28.0 22.4
Liabilities NWC / Total Assets 1.0 (13.2) (17.8) (32.9)
Borrowings 392 61 50 50 Inventory Turnover (days) 38.0 41.7 41.7 40.9
Deferred Tax Liability 71 34 39 44 Receivables (days) 6.0 7.0 6.5 3.8
Equity Share Capital 251 239 239 239 Payables (days) 45.4 44.4 43.0 38.4
Face Value per share (Rs) 10 10 10 10 D/E Ratio (x) 0.1 0.0 0.0 0.0
Reserves & Surplus* 4,059 4,196 4,783 4,881
Less: Misc. Exp. #. 463 342 342 342 Profitability Ratios (%)
Net Worth 3,847 4,093 4,680 4,777 Rec. Net Income Margins 7.7 8.4 8.7 9.7
Total Liabilities 4,310 4,188 4,768 4,871 RoCE 24.5 32.6 34.0 38.5
Source: Company data, i-SEC Research RoNW 30.3 34.5 34.5 39.1
*excluding revaluation reserves; # = not written off Dividend Payout Ratio 25.9 25.6 58.2 94.4
Sept-04 Dec-04 Mar-05 Jun-05
Net sales 4,271 3,828 3,829 4,054
% growth (YoY) 12.6 6.1 5.6 2.7
EBITDA 552 517 292 580
Margin (%) 12.9 13.5 7.6 14.3
Add: Extraordinaries (33) (32) (115) 34
Adj. Net profit 494 318 238 380
'# Other Income including booking of past unrealised treasury gains.
FMCG - 8
Equity Research
October 7, 2005
Colgate-Palmolive BUY
FMCG A breath of fresh air Rs257

Colgate has improved its market share in toothpastes and toothbrushes on the
back of innovative product launches. We expect revenues to grow 12% YoY in
Shareholding pattern
Dec Mar Jun Q2FY06E – the highest quarterly growth in the past five years. With significant
'04 '05 '05
Promoters 51.0 51.0 51.0
margin expansion and lower effective tax rates, the net profit is likely to surge
Institutional 45% YoY to Rs391mn. On the back of a strong performance, we expect re-rating
investors 16.1 17.2 18.1
MFs and UTI 2.8 3.3 3.6 of the stock to continue.
FIIs
Others
4.0
32.9
4.5
31.8
4.8
30.9
f Gaining market share through innovative product launches. During the quarter,
Source: CMIE Colgate launched a new toothpaste variant Colgate Activ Salt. The company’s value
market share of toothpastes has risen nearly 100bps YoY to 48%. Besides, it
launched India’s first toothbrush with a unique tongue cleaning feature.
Consequently, the company’s market share in toothbrushes rose to 31.3% in August
’05 – the highest market share in the past three years.
f Revenues to grow in double-digits. We expect Colgate’s revenues to grow 12%
Price chart YoY, which is the highest quarterly sales growth registered by the company in the
280
past five years. The hike in prices coupled with excise exemptions and higher
primary sales prior to the celebration of Oral Health Month in October ’05 would
240 support sales growth.
f Profit to surge 45% YoY. On the back of price hikes in toothpastes, lower VAT
(Rs)
200
rates and reduction in excise, the operating margin is expected to improve 166bps
160 to 19.7% and operating profits are expected to increase 22% YoY to Rs541mn. The
net profit would receive a boost from decline in effective tax rate due to lowering of
120
corporate tax rates as well as exemption on profits from the new unit at Baddi,
Oct-04
Dec-04
Feb-05
May-05
Jul-05
Oct-05
Himachal Pradesh. The net profit is likely to surge 45% YoY to Rs391mn.
f Offers high dividend yield. On the back of a strong performance, the stock is likely
to get re-rated. Besides, it offers a dividend yield of over 4% for FY07E.
Quarterly estimates
Revenues 2,752 2,457 12.0 6.5 2,583 2,427 6.4
EBITDA 541 442 22.3 30.1 415 403 3.1
PBT 559 446 25.4 19.2 494 411 20.4
PAT 391 270 45.1 18.8 329 254 29.4
Source: Company data, i-SEC Research * April - June
Sales are net of excise duty.
Market Cap Rs35bn/US$790mn Year to March FY04 FY05 FY06E FY07E

Shares Outstanding (mn) 136 Revenue (Rs mn) 9,392 9,642 10,864 11,668
FII (%) 4.8 Net Income (Rs mn) 997 1,216 1,599 1,889
Daily Volume (US$'000) 1,810 EPS (Rs) 7.3 8.9 11.8 13.9
FMCG - 9
Colgate-Palmolive ICICI Securities
Financial Summary
of which Exports 127 130 146 157 Working Capital Changes (417) 448 257 159
of which Domestic 9,266 9,512 10,717 11,510 Capital Commitments (38) (763) (125) (100)
Operating Expenses 7,928 7,903 8,827 9,446 Free Cash Flow 911 712 1,683 1,887
% margins 16 18 19 19 Activities 711 347 305 337
Gross Interest 6 12 2 2 Buyback of shares - - - -
Other Income 255 342 305 337 Inc (Dec) in Borrowings 0 (5) (5) -
Recurring PBT 1,531 1,908 2,104 2,304 Dividend paid (844) (1,035) (1,344) (1,629)
Add: Extraordinaries 83 (126) 0 0 Extraordinary Items 83 (126) - -
Less: Taxes 534 649 505 415 Chg. in Cash & Bank balance 295 18 640 595
- Deferred tax (55) (52) 21 23
Net Income (Reported) 1,080 1,133 1,599 1,889 Table 4: Key Ratios
Recurring Net Income 997 1,216 1,599 1,889
(Year ending March 31)
Per Share Data (in Rs.)
Table 2: Balance Sheet EPS(Basic Recurring) 7.3 8.9 11.8 13.9
(Rs mn, year ending March 31) Diluted Recurring EPS 7.3 8.9 11.8 13.9
FY04 FY05 FY06E FY07E Recurring Cash EPS 8.7 10.1 13.5 15.8
Assets Dividend per share (DPS) 6.0 7.0 9.3 11.0
Total Current Assets 3,300 3,165 3,919 4,611 Book Value per share (BV) 18.0 19.3 20.5 22.0
of which cash & cash
equivalents 1,934 1,947 2,587 3,188 Growth Ratios (%)
Total Current Liabilities & Operating Income (0.9) 2.7 12.7 7.4
Provisions 2,932 3,270 3,731 4,047 EBITDA 3.1 18.7 17.2 9.1
Net Current Assets 368 (105) 188 565 Recurring Net Income 12.4 22.0 31.4 18.2
Investments Diluted Recurring EPS 12.4 22.0 31.4 18.2
of which 1,159 1,159 1,159 1,159 Diluted Recurring CEPS 9.0 16.9 33.2 16.7
Strategic/Group 111 111 111 111
Other Marketable 941 1,048 1,048 1,048 Operating Ratio (%)
Net Fixed Assets 940 1,541 1,429 1,277 Raw Material/Sales 51.2 50.1 48.1 47.3
of which SG&A/Sales 17.5 16.0 16.1 16.0
intangibles 330 541 502 448 Other Income / PBT 16.7 17.9 14.5 14.6
Capital Work-in-Progress 42 30 30 30 Effective Tax Rate 33.1 36.4 24.0 18.0
Total Assets 2,466 2,595 2,776 3,000 NWC / Total Assets (37.0) (54.1) (63.0) (65.8)
Inventory Turnover (days) 41.0 38.3 30.4 30.2
Liabilities Receivables (days) 12.9 11.0 11.1 12.2
Borrowings 22 17 12 12 Payables (days) 96.1 98.0 97.5 100.1
Deferred Tax Liability 1 (50) (29) 0 D/E Ratio (x) 0.0 (0.0) (0.0) 0.0
Equity Share Capital 1,360 1,360 1,360 1,360
Face Value per share (Rs) 10 10 10 10 Return/Profitability Ratio (%)
Reserves & Surplus* 1,083 1,268 1,433 1,628 Recurring Net Income Margins 10.3 12.2 14.3 15.7
Less: Misc. Exp. n.w.o. 0 0 0 0 RoCE 37.1 48.4 59.6 65.5
Net Worth 2,443 2,628 2,793 2,988 RoNW 38.4 48.0 59.0 65.4
Total Liabilities 2,466 2,595 2,776 3,000 Dividend Payout Ratio 85.2 94.8 89.7 89.7
Source: Company data, i-SEC Research Source: Company data, i-SEC Research
*excluding revaluation reserves;

Net sales 2,457 2,358 2,400 2,583
% growth (YoY) 6.5 (5.8) 3.9 6.4
EBITDA 442 452 438 415
Margin (%) 18.0 19.2 18.3 16.1
Other income 54 107 126 106
Add: Extraordinaries 0 78 (33) (75)
Net profit 270 335 345 329
FMCG - 10
Equity Research
October 7, 2005
GlaxoSmithKline Consumer BUY
FMCG Margin expansion to continue Rs520

GlaxoSmithKline Consumer (GSKCH) is likely to witness margin expansion of
200bps YoY due to lower input prices and excise exemptions from the new third
party unit in Uttaranchal. The net profit is likely to jump 39% YoY. Valuations are
Dec Mar Jun
‘04 ‘05 ‘05 attractive and are among the lowest in the i-SEC FMCG universe. BUY.
Promoters 40.0 40.0 43.2
Institutional
investors 33.8 33.0 30.5
f Sales expected to grow 9% YoY. The September quarter is seasonally the best
MFs and UTI 6.8 5.8 4.1 quarter for GSKCH, due to increased consumption during the monsoons. The
FIIs 9.3 9.7 8.4 company continues to remain aggressive with variant launches; during the quarter it
Others 26.2 27.0 26.4
Source: CMIE
launched the Lite variants of Horlicks beverage and biscuits, specially targeted at
the growing diabetic population in the country. After a higher than normal revenue
growth of 15.5% in Q2CY05, we expect the company’s net sales to grow 9% YoY in
Q3CY05E.
Price chart f Maintaining market share. After losing market share in the previous quarters,
GSKCH’s market share in beverages have stabilised at about 64%. While the
550
500 market share of Boost remains strong, Horlicks is witnessing marginal decline.
450
f OPM to expand 200bps YoY to 20.9%. While the price of milk, the key input, is
400
(Rs)
significantly lower as compared with the previous year, the realisations of products
350
300 are higher by 1.5%. Further, the recent commencement of the new third-party
250 packaging unit in Uttaranchal would lead to significant savings in excise duty. So,
200 we expect OPM to expand 200bps YoY to 20.9%. The operating profits are
Oct-04
Dec-04
Feb-05
May-05
Jul-05
Oct-05
expected to grow 20.3% YoY to Rs536mn. With lower amortisation and decline in
the effective tax rate, the net profit is likely to grow 38.7% YoY to Rs313mn.
f Stock is attractively valued. We have recently raised GSKCH’s earnings
estimates sharply for CY05E and CY06E. Further, we have upgraded the stock to
BUY on account of the following factors: i) robust free cashflow generation ii) its
valuations are among the lowest in the Indian FMCG sector, and iii) the quality of
earnings compared with peers is superior as it is not boosted by tax exemptions.
Quarterly estimates
(Rs mn, year ending December 31)
Q3CY05E Q3CY04 YoY (%) QoQ (%) YTDCY05* YTDCY04* YoY (%)
Revenues 2,558 2,350 8.9 5.3 4,658 4,202 10.9
EBITDA 536 445 20.3 8.9 968 732 32.3
PBT 474 364 30.1 7.6 863 597 44.7
PAT 313 226 38.7 7.6 588 381 54.3
Source: Company data, i-SEC Research *January to June
Market Cap Rs21.9bn/$494mn Year to Dec CY04 CY05E CY06E CY07E

FMCG - 11
GlaxoSmithKline Consumer ICICI Securities
Financial Summary
(Rs mn, year ending December 31) (Rs mn, year ending December 31)
CY04 CY05E CY06E CY07E CY04 CY05E CY06E CY07E
of which Exports 453 590 766 996 Working Capital Changes (105) (50) (151) (157)
% margins 17.5 20.0 21.8 23.0 Activities 196 233 305 374
Depreciation & Amortisation 464 409 409 409 Issue of Share Capital - (1,233) - -
Other Income 196 233 305 374 Inc (Dec) in Borrowings - - - -
Recurring PBT 1,200 1,753 2,235 2,661 Dividend paid (359) (417) (534) (652)
Add: Extraordinaries 0 0 0 0 Extraordinary Items - - - -
Less: Taxes 425 579 737 878 Chg. in Cash & Bank balance 709 (334) 991 1,151
- Deferred tax 38 20 20 20
Net Income (Reported) 775 1,175 1,497 1,783 Table 4: Key Ratios
Recurring Net Income 775 1,175 1,497 1,783 (Year ending December 31)
Source: Company data, i-SEC Research CY04 CY05E CY06E CY07E
Per Share Data (in Rs.)
Diluted Recurring EPS 17.1 27.9 35.6 42.4
Recurring Cash EPS 27.3 37.6 45.3 52.1
CY04 CY05E CY06E CY07E
Dividend per share (DPS) 7.0 10.0 12.5 15.0
Assets Book Value per share (BV) 116.6 113.2 134.5 159.8
Total Current Assets 4,322 4,046 5,203 6,529
of which cash & cash Growth Ratios (%)
equivalents 2,632 2,298 3,289 4,441 Operating Income 8.1 11.4 11.0 9.4
Total Current Liabilities & EBITDA 13.5 26.9 21.3 15.2
Provisions 1,783 1,855 1,935 2,018 Recurring Net Income 19.2 51.6 27.5 19.1
Net Current Assets 2,539 2,191 3,268 4,510 Diluted Recurring EPS 19.2 63.5 27.5 19.1
Investments 0 0 0 0 Diluted Recurring CEPS 7.2 37.9 20.4 15.0
of which
Strategic/Group 0 0 0 0 Operating Ratio (%)
Other Marketable 0 0 0 0 Raw Material/Sales (%) 36.8 34.6 34.4 34.3
Net Fixed Assets 3,074 2,907 2,748 2,590 SG&A/Sales (%) 18.3 18.8 18.2 17.7
of which Other Income / PBT (%) 16.4 13.3 13.6 14.1
intangibles 596 498 400 302 Effective Tax Rate (%) 34.2 33.0 33.0 33.0
Capital Work-in-Progress 73 65 65 65 NWC / Total Assets (%) (1.7) (2.1) (0.4) 1.0
Goodwill 0 0 0 0 Inventory Turnover (days) 75.1 72.4 72.1 72.4
Total Assets 5,613 5,099 6,017 7,100 Receivables (days) 8.2 7.9 6.9 7.0
Payables (days) 63.7 61.6 59.1 57.1
Liabilities D/E Ratio (x) 0.1 0.1 0.1 0.1
Borrowings 0 0 0 0
Deferred Tax Liability 320 340 360 380 Return/Profitability Ratio (%)
Minority Interest 0 0 0 0 Recurring Net Income Margins 8.7 11.9 13.6 14.7
Equity Share Capital 454 421 421 421 RoCE 15.0 21.9 26.9 27.2
Face Value per share (Rs) 10 10 10 10 RoNW 15.2 23.4 28.8 28.8
Reserves & Surplus* 4,840 4,338 5,236 6,300 Dividend Payout Ratio 46.3 40.4 39.6 39.9
Less: Misc. Exp. # 0 0 0 0

Net sales 2,350 2,114 2,230 2,428
% growth (YoY) 2.4 11.0 6.2 15.5
EBITDA 445 303 476 492
Margin (%) 19.0 14.3 21.4 20.3
Add: Extraordinaries 0 (43) (47) 0
Net profit 226 153 297 291
FMCG - 12
Equity Research
October 7, 2005
Godrej Consumer Products BUY
FMCG On the ascent Rs469

Godrej Consumer Products’ (GCPL) branded sales are likely to grow 28% YoY –
Dec Mar Jun the fastest pace in past five years and the highest in the i-SEC FMCG universe.
'04 '05 '05
Promoters 68.2 68.2 68.2
Price hike in hair dyes, benign input prices and higher fiscal benefits are likely to
Institutional boost net profit 55% YoY to Rs270mn. We expect the company’s rich valuations
investors 19.3 19.6 19.4
MFs and UTI 2.1 2.0 2.2 to continue on the back of strong sustainable growth.
FIIs
Others
17.1
12.5
17.4
12.2
17.0
12.5
f Branded sales to grow 28% YoY. GCPL’s branded sales are likely to grow 28%
Source: CMIE YoY – the fastest pace in the past five years. The branded sales growth would be
led by hair colours – likely to jump 51% YoY, on a low base – and toilet soaps –
likely to grow 21% YoY.
f Gaining market share. Post the hike in hair dye sachets prices, the company has
regained market share in hair colours by nearly 300bps to 42%. GCPL is now the
Price chart
second-largest toilet soaps company in India, after gaining market share at Nirma’s
530
cost. Interestingly, FairGlow, which had been witnessing decline in sales in the past
480
430
few years, is now growing at a healthy pace.
380 f Surge in net profit. 14% price hike in hair dye sachets, lower input prices for toilet
(Rs)
330
soaps and higher magnitude of excise exemptions are likely to boost OPM 357bps
280
230 YoY to 19.7%; operating profits are likely to surge 51% YoY to Rs327mn. With tax
180 rates at MAT levels, profits are likely to surge 55% YoY to Rs270mn.
Oct-04
Dec-04
Feb-05
May-05
Jul-05
Oct-05
f Rich valuations to continue on the back of strong sustainable growth. We

expect GCPL to sustain double-digit topline growth due to its focus on gaining
market share in toilet soaps and on expanding the hair colour market, which is still at
a nascent stage. Driven by sustained strong growth, we expect rich valuations to
continue. Besides, the stock offers a dividend yield of over 4% for FY07E.
Quarterly estimates
Q2FY06E Q2FY05 YoY (%) QoQ (%) YTD FY06 YTD FY05 YoY (%)
Revenues 1,660 1,342 23.7 (1.0) 1,677 1,366 22.7
EBITDA 327 217 51.0 (1.2) 331 223 48.2
PBT 294 192 53.2 (1.3) 298 192 55.3
PAT 270 174 55.2 (0.3) 271 173 56.6
Source: Company data, i-SEC Research * Apr-June
Market Cap Rs26.7bn/US$603mn Year to March FY05 FY06E FY07E FY08E

+91 22 5637 7230
Sensex Return 12m (%) 47.0 RoE (%) 179.8 227.4 241.8 220.5
FMCG - 13
Godrej Consumer Products ICICI Securities
Financial summary
FY05 FY06E FY07E FY08E FY05 FY06E FY07E FY08E
Operating Income (Sales) 5,627 6,604 7,669 8,748 Operating Cash flow 888 1,201 1,435 1,645
of which Exports 96 116 139 166 Working Capital Changes (29) (76) (83) (22)
% margins 17.9 20.0 20.6 20.7 Activities 32 15 20 30
Gross Interest 25 27 29 29 Buyback of shares (51) (2) (140) -
Other Income 32 25 20 30 Inc (Dec) in Borrowings (181) (11) - -
Recurring PBT 906 1,209 1,454 1,687 Dividend paid (714) (923) (1,130) (1,335)
Add: Extraordinaries 80 0 0 0 Extraordinary Items 80 - - -
Less: Taxes 90 97 117 136 Chg. in Cash & Bank balance (50) (15) 163 218
Net Income (Reported) 896 1,112 1,337 1,552
Recurring Net Income 829 1,112 1,337 1,552
Table 4: Key Ratios
Table 2: Balance Sheet (Year ending March 31)
(Rs mn, year ending March 31) FY05 FY06E FY07E FY08E
FY05 FY06E FY07E FY08E Per Share Data (Rs)
Assets EPS(Basic Recurring) 14.6 19.7 23.8 27.6
Total Current Assets 1,031 1,090 1,428 1,771 Diluted Recurring EPS 14.6 19.8 23.8 27.6
of which cash & cash Recurring Cash EPS 16.5 21.8 25.9 29.8
equivalents 90 75 238 456 Dividend per share (DPS) 12.0 15.4 18.6 21.8
Total Current Liabilities & Book Value per share (BV) 8.8 8.5 11.1 13.9
Provisions 1,406 1,470 1,623 1,787
Net Current Assets (375) (380) (195) (16) Growth Ratios (% YoY)
Investments Operating Income 14.5 17.4 16.1 14.1
of which 0 10 10 10 EBITDA 20.4 31.8 19.4 14.5
Strategic/Group 0 0 0 0 Recurring Net Income 34.6 34.1 20.2 16.1
Other Marketable 0 10 10 10 Diluted Recurring EPS 35.3 35.0 20.2 16.1
Net Fixed Assets 1,014 979 941 917 Diluted Recurring CEPS 32.4 31.9 18.8 15.1
of which
intangibles 244 236 226 221 Operating Ratios (%)
Capital Work-in-Progress 7 5 5 5 Raw Material/Sales 50.7 48.1 48.8 48.6
Goodwill 0 0 0 0 SG&A/Sales 17.3 18.5 17.9 18.0
Total Assets 639 609 756 911 Other Income / PBT 3.6 2.1 1.4 1.8
Liabilities NWC / Total Assets (72.7) (74.6) (57.2) (51.8)
Borrowings 61 50 50 50 Inventory Turnover (days) 70.6 78.6 75.9 76.1
Deferred Tax Liability 79 80 80 80 Receivables (days) 5.7 2.9 2.9 2.9
Equity Share Capital 226 225 225 225 Payables (days) 69.9 67.7 63.6 60.0
Face Value per share (Rs) 4 4 4 4 D/E Ratio (x) 0.3 0.3 0.2 0.2
Reserves & Surplus* 272 254 401 557
Net Worth 499 479 626 781 Profitability Ratios (%)
Total Liabilities 639 609 756 911 Rec.et Income Margins 14.6 16.8 17.4 17.7
Source: Company data, i-SEC Research RoCE 123.3 182.0 199.7 189.3
*excluding revaluation reserves RoNW 179.8 227.4 241.8 220.5
Dividend Payout Ratio 85.9 89.0 89.0 90.0
Net sales 1,342 1,535 1,385 1,677
% growth (YoY) 10.5 19.7 13.6 22.7
EBITDA 217 324 237 331
Margin (%) 16.1 26.7 17.1 48.2
Add: Extraordinaries - - 80 0
Adj. Net profit 174 260 209 271
FMCG - 14
Equity Research
October 7, 2005
Goodlass Nerolac BUY
FMCG Bright hues Rs730

With a growth of over 20% YoY expected in the decorative paints segment,
Shareholding pattern Goodlass Nerolac Paints’ (GNPL) is likely to register revenue growth of 17% YoY
Dec Mar Jun in Q2FY06E. Benefits from the new unit in Haryana and improvement in
‘04 ‘05 ‘05
Promoters 64.5 64.5 64.5
operational efficiencies are likely to enhance the company’s margins further.
Institutional However, net profit growth would be limited to 4% YoY due to higher depreciation
investors 21.2 21.5 21.6
MFs and UTI 11.7 12.3 11.0 and lower treasury gains. We believe re-rating of the stock will continue.
FIIs 3.0 3.2 4.8
Others 14.3 14.0 13.9 f Decorative paints segment to drive sales growth. We expect the decorative
Source: CMIE
segment to drive GNPL’s growth in FY06. With an expected growth of over 20%
YoY in the decorative paints segment, the company’s revenues are likely to grow
17% YoY.
f Benefits from the new unit and efficiency gains to expand margins further.
GNPL’s new unit is located in Haryana, close to its key industrial clients. This would
Price chart not only offer savings in logistics costs, but also substantially under VAT. Benefit
850 from this unit and improvement in operational efficiencies are likely to enhance the
750 company’s OPM by 85bps YoY to 17.5%, which further widens the gap with its
650 peers in terms of OPMs.
(Rs)
550
450
f Lower treasury gains and higher depreciation to limit profit growth. We expect
350
the company’s operating profits to grow 23% YoY to Rs471mn. However, lower
treasury gains and higher depreciation due to the new unit (the company follows
250
depreciation on written-down method instead of the generally-accepted straight line
Oct-04
Dec-04
Feb-05
May-05
Jul-05
Oct-05
method) would limit the net profit growth to 4% YoY.
f Re-rating to continue. Given the robust growth in the paints sector and GNPL’s
focus on improving efficiencies, we believe the re-rating of stock will continue.
Quarterly estimates
Q2FY06E Q2FY05 YoY (%) QoQ (%) YTDFY06 YTDFY05 YoY (%)
Revenues 2,686 2,295 17.0 18.5 2,266 1,919 18.1
EBITDA 471 383 23.0 27.4 370 276 34.0
PBT 458 428 7.1 38.9 330 241 37.0
PAT 304 292 4.2 40.6 217 155 39.5
Market Cap Rs18.6bn/US$420mn Year to March FY04 FY05 FY06E FY07E

FII (%) 4.8 Net Income (Rs mn) 580 876 906 1,094
FMCG - 15
Goodlass Nerolac ICICI Securities
Financial summary (Standalone)
FY04 FY05 FY06E FY07E FY04 FY05P FY06E FY07E
Operating Income (Sales) 7,605 8,795 10,026 11,330 Operating Cash flow 698 968 1,219 1,388
of which Working Capital changes 219 (37) (61) 13
Exports 3 3 4 4 Capital Commitments (390) (1,026) (350) (350)
Domestic 7,602 8,792 10,023 11,326 Net Operating FCF 527 (96) 808 1,051
Operating Expenses 6,581 7,437 8,396 9,447 Investing Activities (229) 284 (375) (415)
EBITDA 1,023 1,358 1,630 1,883 Issue of Share Capital - 102 - -
% margin 13.5 15.4 16.3 16.6 Inc(Dec) in Borrowings (3) 25 25 25
Depreciation & Amortisation 220 207 413 399 Dividend paid (155) (216) (288) (432)
Gross Interest 13 8 10 10 Extraordinary Items - - - -
Other Income 98 180 125 135 Chg. in Cash & Bank 139 (3) 170 229
Recurring PBT 888 1,324 1,332 1,608 Source: Company data, i-SEC Research
Add: Extraordinaries 0 49 0 0
Less: Taxes 308 455 426 515
- Current tax 309 432 401 485
- Deferred tax (1) 23 25 30
Table 4: Key Ratios
Net Income (Reported) 580 918 906 1,094 (Year ending March 31)
Recurring Net Income 580 876 906 1,094 FY04 FY05P FY06E FY07E
Source: Company data, i-SEC Research Per Share Data (Rs)
Table 2: Balance Sheet Diluted Recurring EPS 22.7 35.1 40.0 46.4
(Rs mn, year ending March 31) Dividend per share 7.5 10.0 15.0 18.0
FY04 FY05P FY06E FY07E Book Value 103.9 128.5 147.1 169.6
Assets
Total Current Assets 2,718 2,940 3,371 3,853 Growth Ratios (% YoY)
of which 187 184 354 583 Operating Income 16.4 15.7 14.0 13.0
Cash & cash equivalents EBITDA 40.1 32.7 20.0 15.5
Current Liab. & Prov. 1,875 2,135 2,479 2,832 Recurring Net Income 45.5 51.2 3.3 20.8
Net Current Assets 843 805 891 1,021 Diluted Recurring EPS 45.5 54.5 13.9 16.0
Investments 1,304 1,200 1,700 2,250 Diluted Recurring CEPS 25.0 35.4 21.8 13.2
of which
Strategic/Group 10 10 10 10 Operating Ratios (%)
Marketable 1,294 1,190 1,690 2,240 Raw Material / Sales 60.1 60.4 61.0 61.5
Net Fixed Assets* 1,085 1,904 1,841 1,791 SG&A / Sales 11.2 10.3 9.7 9.4
of which Other Income / PBT 11.0 13.6 9.4 8.4
Intangibles 0 0 0 0 Effective Tax Rate 34.7 33.1 32.0 32.0
Capital Work-in-Progress 211 25 25 25 NWC / Total Assets 20.3 15.9 12.1 8.6
Total Assets 3,232 3,909 4,432 5,062 Inventory (days) 76.0 70.3 65.3 62.8
Liabilities Payable (days) 77.4 75.5 74.0 74.1
Borrowings 704 729 754 779 Debt/Equity Ratio (%) 0.2 0.2 0.2 0.2
Deferred Tax Liability (122) (99) (74) (44)
Minority Interest 0.0 0.0 0.0 0.0 Profitability Ratios (%)
Equity Share Capital 153 255 255 255 Rec. Net Income Margins 7.5 9.8 8.9 9.5
Face value per share (Rs) 10 10 10 10 RoCE 19.3 24.7 21.9 23.2
Reserves & Surplus* 2,496 3,024 3,497 4,072 RoNW 23.5 29.6 25.8 27.1
Less: Misc. Exp. # 0.0 0.0 0.0 0.0 Dividend Payout 37.2 31.4 47.8 47.4

Net sales 2,295 2,549 2,050 2,266
% growth (YoY) 9.6 22.8 12.9 18.1
EBITDA 383 386 314 370
Margin (%) 16.7 15.1 15.3 16.3
Add: Extraordinaries 0 0 0 0
Adj. Net profit 292 242 189 217
FMCG - 16
Equity Research
October 7, 2005
Hindustan Lever HOLD
FMCG Market share’s the buzzword Rs180

A change in leadership has prompted a shift in strategy and Hindustan Lever
(HLL) is now increasing its focus on market share. Considering the market
Dec Mar Jun
share gains and improving demand from rural markets, we expect HLL’s
'04 '05 '04 sales and recurring profit to grow 11.5% YoY and 17% respectively. After its
Promoters 51.6 51.6 51.6
Institutional underperformance, its valuation premium as compared with peers has
investors 27.7 27.9 27.9
MFs and UTI 0.6 0.6 0.9 narrowed.
FIIs 13.7 14.4 14.0 f Shift in strategy, to focus on market share. With the change in leadership
Others 20.8 20.5 20.5
Source: CMIE from Mr MS Banga to Mr Harish Manwani, there has been a shift in strategy,
with HLL now increasing its focus on market share. ACNielsen’s data till August
’05 reflects that the company has gained market share in shampoos, packaged
teas and coffee. Further, HLL has undertaken significant initiatives in the trade
channel to improve competitiveness.
Price chart f Double-digit sales growth. The improvement in rural demand is likely to boost
HLL’s sales. This coupled with higher YoY realisations across segments such
200
as fabric wash, personal care and coffee would lead to double-digit sales
180
growth. The key factor to watch for is the growth of the Lux brand, which is
160 currently undergoing a revamp.
(Rs)
140
f Recurring PAT to grow 17% YoY. While the cost pressure continues and the
120 company is incurring higher brand support expenses, it would benefit from
100 robust sales growth, higher fiscal benefits at new units, reduced losses from the
Oct-04
Dec-04
Feb-05
Oct-05
May-05
Jul-05
foods business and absence of negative spread on bonus debentures. We

expected the recurring profit to grow 17% YoY to Rs3.1bn.
f Valuation premium as compared with peers has narrowed. With HLL
having sharply underperformed the BSE FMCG Index on YTD basis, its
valuation premium as against peers has narrowed down significantly compared
with historical levels. We see limited downside risk and maintain HOLD.
Quarterly estimates
Q3CY05E Q3CY04 YoY (%) QoQ (%) YTD CY05* YTD CY04* YoY (%)
Revenues 27,018 24,224 11.5 (5.8) 54,129 49,940 8.4
EBITDA 4,035 3,599 12.1 7.1 6,594 7,138 (7.6)
PBT 4,006 3,465 15.6 3.3 6,591 6,651 (0.9)
PAT 3,145 2,689 17.0 4.7 5,113 5,095 0.3
Source: Company data, i-SEC Research * January to June
Market Cap Rs397bn/US$9.0bn Year to Dec CY03 CY04 CY05E CY06E

Shares Outstanding (mn) 2,201 Revenue (Rs mn) 102,754 100,653 109,395 117,392
Absolute Return 3m (%) 13.6 % Chg YoY (0.8) (35.1) 16.7 21.2
FMCG - 17
Hindustan Lever ICICI Securities
Financial summary
CY03 CY04 CY05E CY06E CY03 CY04 CY05E CY06E
of which Exports 12,463 12,490 13,421 14,494 Working Capital Changes (1,052) 321 1,460 (360)
of which Domestic 90,291 88,163 95,974 102,898 Capital Commitments (1,143) (1,810) (2,000) (2,000)
Operating Expenses 81,835 85,683 93,196 97,756 Free Cash Flow 13,207 8,763 12,446 13,481
% margins 20.4 14.9 14.8 16.7 Activities 1,792 5,237 11,520 (1,542)
Depreciation & Amortisation 1,248 1,209 1,307 1,411 Issue of Share Capital - - - -
Gross Interest 668 1,300 134 136 Buyback of shares - - - -
Other Income 2,914 1,804 1,478 1,458 Inc (Dec) in Borrowings 16,460 (2,332) (14,711) -
Recurring PBT 21,917 14,266 16,235 19,547 Dividend paid (19,733) (13,562) (11,997) (13,196)
Add: Extraordinaries 684 915 0 0 Extraordinary Items 684 915 - -
Less: Taxes 4,883 3,207 3,328 3,909 Chg. in Cash & Bank balance (1,361) (1,084) (2,742) (1,257)
- Current tax 4,274 2,660 3,078 3,659 Source: Company data, i-SEC Research
- Deferred tax 609 547 250 250
Table 4: Key Ratios
Table 2: Balance Sheet (Year ending December 31)
(Rs mn, year ending December 31) CY03 CY04 CY05E CY06E
CY03 CY04 CY05E CY06E Per Share Data (Rs)
Assets EPS(Basic Recurring) 7.7 5.0 5.9 7.1
Total Current Assets 35,018 33,050 31,818 32,067 Diluted Recurring EPS 7.7 5.0 5.9 7.1
of which cash & cash Recurring Cash EPS 8.3 5.6 6.5 7.7
equivalents 8,165 6,980 4,239 2,982 Dividend per share (DPS) 13.3 5.0 5.0 5.5
Total Current Liabilities & Book Value per share (BV) 9.7 9.5 9.7 10.5
Provisions 38,706 37,143 40,662 42,413
Net Current Assets (3,688) (4,093) (8,844) (10,347) Growth Ratios (% YoY)
Investments 25,749 22,296 12,254 15,254 Operating Income 2.2 (2.0) 8.7 7.3
of which EBITDA 1.6 (28.4) 8.2 21.2
Strategic/Group 2,243 2,122 2,122 2,122 Recurring Net Income (0.8) (35.1) 16.7 21.2
Other Marketable 23,506 20,174 10,131 13,131 Diluted Recurring EPS (0.8) (35.1) 16.7 21.2
Net Fixed Assets 13,688 15,169 15,861 16,450 Diluted Recurring CEPS (1.3) (32.9) 15.9 19.9
of which
Capital Work-in-Progress 738 944 944 944 Operating Ratios (%)
Total Assets 35,749 33,372 19,270 21,356 Raw Material/Sales 52.0 54.5 55.9 54.2
SG&A/Sales 18.5 21.2 20.0 19.9
Liabilities Other Income / PBT 13.3 12.6 9.1 7.5
Borrowings 17,043 14,711 0 0 Effective Tax Rate 20.4 18.4 20.5 20.0
Deferred Tax Liability (2,674) (2,260) (2,010) (1,760) NWC / Total Assets (32.9) (33.2) (67.9) (62.4)
Minority Interest 0 0 0 0 Inventory Turnover (days) 84.0 87.7 84.1 85.6
Equity Share Capital 2,201 2,201 2,201 2,201 Receivables (days) 13.8 16.1 15.2 14.5
Face Value per share (Rs) 1 1 1 1 Payables (days) 107.8 104.7 102.5 105.2
Reserves & Surplus* 19,186 18,726 19,086 20,922 D/E Ratio (x) 0.7 0.6 0.0 0.0
Less: Misc. Exp. # 0 0 0 0
Net Worth 21,380 20,920 21,280 23,116 Profitability Ratios (%)
Total Liabilities 35,749 33,372 19,270 21,356 Rec. Net Income Margins 16.1 10.8 11.6 13.2
Source: Company data, i-SEC Research RoCE 50.0 35.1 49.4 77.5
*excluding revaluation reserves; # = not written off RoNW 58.8 52.3 61.2 70.4
Dividend Payout Ratio 185.9 104.1 97.2 88.3
Net sales 24,224 26,438 25,454 28,363
% growth (YoY) (3.5) 0.4 6.9 10.3
EBITDA 3,336 4,629 2,825 3,769
Margin (%) 15.0 17.8 11.1 13.1
Other income 508 486 245 482
Add: Extraordinaries 555 (238) 394 (188)
Adj. Net profit 2,689 3,575 2,108 3,005
FMCG - 18
Equity Research
October 7, 2005
ITC BUY
FMCG Premium blend Rs126

ITC’s net profit is likely to grow 20% YoY to Rs5.8bn in Q2FY06E, driven by a
Shareholding pattern sharp improvement in profitability of cigarettes, hotels and paperboards. While
Dec Mar Jun the recent outperformance discounts near term performance, we remain positive
‘04 ‘05 ‘05
Promoters - - -
on the long-term outlook for the stock.
Institutional
investors 50.8 51.3 51.4 f Cigarette profits to grow 20% YoY. We expect ITC to maintain robust cigarette
MFs and UTI 13.7 13.6 13.5
Insurance Cos. 20.9 20.2 21.0 sales growth, with Q2FY06E sales value to grow 10% YoY. Lower state taxes and
FIIs 16.2 17.5 16.9
Others 49.2 48.7 48.6
cigarette price hikes more than offset the impact of a 10% increase in excise duty
Source: CMIE on cigarettes; we expect the profit of the cigarette segment to grow 20% YoY to
Rs7bn. The deferment of ban of smoking scenes in movies from October 2, ’05 to
April ’06 would be a positive.
f Sharp improvement in profitability of hotels and paperboard businesses.
Benefiting from the strong cyclical upturn, the profitability of the hotels business is
likely to more than double to Rs355mn. Further, with teething problems at the new
Price chart line at Bhadrachalam subsiding, PBIT of paperboard business is likely to grow 39%
160 YoY to Rs953mn.
140
f Recurring PAT to grow 20% YoY. The sharp improvement in profitability of
120 cigarettes, hospitality and paperboard businesses would lead to 21% YoY growth in
(Rs)
100 EBITDA. Lower interest charge and higher other income is likely to be offset by
80 increase in effective tax rate; we expect recurring PAT to grow 20% YoY to
Rs5.8bn.
60
Oct-04
Dec-04
Feb-05
May-05
Jul-05
Oct-05
f Valuations are rich after the recent outperformance. After the strong
outperformance of the stock YTD, we see limited near-term upside. However, we
remain positive on the long-term outlook for the stock based on the processed
foods business, rural retail, sourcing and distribution through e-choupal being
scaled up at a fast pace.
Quarterly estimates
Revenues 21,529 17,379 23.9 (5.0) 39,606 33,399 18.6
EBITDA 8,431 6,979 20.8 2.0 8,268 7,092 16.6
PBT 8,459 6,875 23.0 4.2 8,034 6,566 22.4
PAT 5,837 4,857 20.2 8.0 5,404 4,486 20.4
Market Cap Rs472bn/US$10.6bn Year to March FY04 FY05 FY06E FY07E

Shares Outstanding (mn) 3,735 Revenue (Rs mn) 64,704 76,395 88,990 101,019
Absolute Return 12m (%) 70.0 CEPS (Rs) 4.9 5.7 7.2 8.2
Anand Shah
FMCG - 19
ITC ICICI Securities
Financial summary
of which Working Capital changes 3,288 (8,554) 1,793 840
Exports 10,775 12,391 14,250 16,388 Capital Commitments (6,561) (8,138) (9,000) (15,000)
Operating Expenses 40,641 48,435 54,552 61,889 Investing Activities (12,138) (6,489) (5,101) (2,348)
EBITDA 24,063 27,960 34,438 39,130 Issue of Share Capital 2 17 1,253 4
% margin 37.2 36.6 38.7 38.7 Buyback of shares - - - -
Depreciation & Amortisation 2,416 3,129 3,563 4,054 Inc(Dec) in Borrowings 39 1,245 (2,454) -
Gross Interest 299 455 289 127 Dividend paid (4,506) (6,501) (10,845) (17,881)
Other Income 2,143 2,358 3,190 3,652 Extraordinary Items 46 3,543 - -
Recurring PBT 23,491 26,735 33,776 38,601 Chg. in Cash & Bank (3,770) (687) (1,517) (6,848)
Add: Extraordinaries 46 3,543 - - Source: Company data, i-SEC Research
Less: Taxes 7,610 8,360 10,302 11,966
- Current tax 7,368 5,477 10,063 11,466
- Deferred tax 242 2,884 239 500
Table 4: Key Ratios
Recurring Net Income 15,897 18,375 23,475 26,635 (Year ending March 31)
Source: Company data, i-SEC Research FY04 FY05 FY06E FY07E
Per Share Data (Rs)
(Rs mn, year ending March 31) Diluted Recurring CEPS 4.9 5.7 7.2 8.2
FY04 FY05 FY06E FY07E Dividend per share 1.3 2.1 4.0 4.8
Assets Book Value 16.9 20.8 22.5 24.1
of which 340 557 1,047 (5,016) Growth Ratios (% YoY)
Cash & cash equivalents Operating Income 10.3 18.1 16.5 13.5
Current Liab. & Prov. 35,327 30,338 42,087 50,249 EBITDA 9.7 16.2 23.2 13.6
Net Current Assets (474) 5,055 (4,506) (14,635) Recurring Net Income 15.0 15.6 27.8 13.5
Investments 30,540 38,747 47,038 53,038 Diluted Recurring EPS 14.9 14.8 27.6 13.3
of which Diluted Recurring CEPS 13.0 16.6 25.5 13.4
Strategic/Group 8,678 8,038 8,038 8,038
Marketable 21,862 30,709 39,000 45,000 Operating Ratios (%)
Net Fixed Assets* 35,512 40,770 46,215 57,169 Raw Material / Sales 36.8 36.3 36.8 37.7
of which SG&A / Sales 13.8 14.1 12.5 12.0
Intangibles - - - - Other Income / PBT 9.1 8.8 9.4 9.5
Capital Work-in-Progress 3,137 1,862 1,862 1,862 Effective Tax Rate 31.8 27.6 30.5 31.0
Total Assets 65,578 84,572 88,747 95,572 NWC / Total Assets (1.2) 5.3 (6.3) (10.1)
Inventory (days) 165.5 178.8 165.0 144.4
Liabilities Receivables (days) 6.7 10.4 9.9 6.7
Borrowings 1,209 2,454 - - Payable (days) 217.9 176.7 141.2 151.9
Deferred Tax Liability 877 3,761 4,000 4,500 Debt/Equity Ratio 0.0 0.1 0.0 0.0
Equity Share Capital 2,477 2,494 3,747 3,751
Face value per share (Rs) 1 1 1 1 Profitability Ratios (%)
Reserves & Surplus* 61,624 76,462 81,591 87,904 Rec. Net Income Margins 23.8 23.3 25.5 25.4
Less: Misc. Exp. # - - - - RoCE 26.7 24.9 27.3 29.0
Net Worth 63,492 78,357 84,747 91,072 RoNW 27.3 25.9 28.8 30.3
Total Liabilities 65,578 84,572 88,747 95,572 Dividend Payout 35.1 40.3 72.8 76.3
Source: Company data, i-SEC Research Source: Company data, i-SEC Research

Net sales 32,889 32,427 35,937 39,606
% growth (YoY) 12.4 8.3 8.7 18.6
EBITDA 6,979 6,756 6,632 8268
Margin (%) 21.2 20.8 18.5 20.9
Other income 699 512 593 578
Add: Extraordinaries - - 3,543 268
Adj. Net profit 4,857 4,489 4,174 5404
FMCG - 20
Equity Research
October 7, 2005
Nestlé India BUY
FMCG Healthy growth Rs867

We expect Nestle to sustain double-digit sales growth in Q3CY05E, led primarily
by the vermicelli and infant nutrition segments. Its operating margin is likely to
Dec Mar Jun
expand 220bps and net profit is expected to grow 28% YoY. We believe that Nestle
‘04 ‘05 ‘05 offers the best bet on India’s processed food industry. The new unit at Uttaranchal
Promoters 61.9 61.9 61.9
Institutional would support earnings growth in the future. BUY.
investors 17.3 17.9 18.1
MFs and UTI 2.8 3.0 3.0 f Double-digit topline growth to continue. We expect Nestls’s revenues to grow
Insurance Cos. 6.5 6.4 6.3 13% YoY, with both domestic and exports businesses registering double-digit growth.
FIIs 8.1 8.5 8.8
Others 20.9 20.2 20.1 The vermicelli and infant nutrition segments are likely to be the key revenue growth
Source: CMIE drivers. Further, the sales growth would be supported by improvement in realisations
across most categories on YoY basis.
f Strengthening its hold in infant food segment. Nestle has strengthened its
dominance in the weaning food and infant food categories with their market share
rising by nearly 200bps YoY each to 94% and 47% respectively. However, it has lost
Price chart market share in coffee and chocolates.
920
f Operating margin to expand 220bps YoY to 21.2%. The hike in prices effected in
860
800
the past year and decline in prices of milk – the key raw material – would more than
740 offset the adverse impact due to the applicability of VAT. We expect Nestle’s
(Rs)
680 operating margin to expand 220bps YoY to 21.2% and operating profits to grow 26%
620 YoY. In line with it, the net profit is likely to grow 28% YoY to Rs844mn.
560
f Best bet on processed foods segment. Nestle is best positioned to leverage the
500
growth of the Indian processed foods industry. Setting up of a unit in a tax-exempt
Oct-04
Dec-04
Feb-05
May-05
Jul-05
Oct-05
location would lead to an improvement in profitability in the future. Its valuation

premium as compared with peers has significantly narrowed down over the past
couple of years.
Quarterly estimates
Q3CY05E Q3CY04 YoY (%) QoQ (%) YTDCY05* YTDCY04* YoY (%)
Revenues 6,730 5,962 12.9 3.1 13,080 11,645 12.3
EBITDA 1,425 1,131 26.0 3.3 2,767 2,046 35.3
PBT 1,294 1,054 22.7 0.2 2,620 1,860 40.9
PAT 844 659 28.1 (2.3) 1,678 1,198 40.1
Source: Company data, i-SEC Research *January to June
Market Cap Rs83.4bn/$1.9bn Year to Dec CY04 CY05E CY06E CY07E

Absolute Return 3m (%) 20.4 % Chg YoY (1.4) 24.4 18.2 17.1
FMCG - 21
Nestlé India ICICI Securities
Financial Summary
CY04 CY05E CY06E CY07E CY04 CY05E CY06E CY07E
of which Exports 2,435 2,730 2,933 3,105 Working Capital Changes 1,255 230 411 306
Operating Expenses 17,766 19,452 21,726 24,070 Free Cash Flow 3,660 3,325 4,118 4,760
% margins 20.2 22.0 22.2 22.5 Activities (574) (27) (453) (431)
Other Income 209 145 239 249 Inc (Dec) in Borrowings 28 (29) - -
Recurring PBT 4,219 5,061 5,859 6,615 Dividend paid (2,675) (2,913) (3,462) (4,012)
Add: Extraordinaries (290) (273) (250) (250) Extraordinary Items (290) (273) (250) (250)
Less: Taxes 1,346 1,685 1,798 1,927 Chg. in Cash & Bank balance 32 217 (47) 67
- Current tax 1,346 1,685 1,798 1,927 Source: Company data, i-SEC Research
Recurring Net Income 2,715 3,377 3,991 4,672 Table 4: Key Ratios
Source: Company data, i-SEC Research (Year ending December 31)
Table 2: Balance Sheet Per Share Data (in Rs.)
Recurring Cash EPS 33.3 40.9 47.5 54.8
Assets Dividend per share (DPS) 24.5 26.5 31.5 36.5
Total Current Assets 3,582 4,118 4,426 4,909 Book Value per share (BV) 33.1 37.5 41.2 46.2
of which cash & cash
equivalents 94 312 264 331 Growth Ratios (%)
Total Current Liabilities & Operating Income 3.4 11.9 12.0 11.2
Provisions 6,182 6,716 7,481 8,214 EBITDA 1.4 21.6 13.2 12.5
Net Current Assets (2,601) (2,598) (3,055) (3,305) Recurring Net Income (1.4) 24.4 18.2 17.1
Investments Diluted Recurring EPS (1.4) 24.4 18.2 17.1
of which 1,549 1,800 2,500 3,250 Diluted Recurring CEPS (0.3) 22.9 16.1 15.6
Strategic/Group 0 0 0 0
Other Marketable 1,549 1,800 2,500 3,250 Operating Ratio (%)
Net Fixed Assets 4,313 4,450 4,565 4,550 Raw Material/Sales 46.4 44.8 45.2 45.5
of which SG&A/Sales 16.0 16.3 16.2 16.1
Capital Work-in-Progress 341 341 341 341 Other Income / PBT 3.5 4.6 4.2 4.6
Total Assets 3,261 3,652 4,010 4,496 Effective Tax Rate 32.4 34.5 32.0 30.0
NWC / Total Assets (82.6) (79.7) (82.8) (80.9)
Liabilities Inventory Turnover (days) 61.7 59.0 57.5 57.0
Borrowings 79 50 50 50 Receivables (days) 4.5 3.8 3.8 3.8
Deferred Tax Liability (12) (12) (12) (12) Payables (days) 51.6 51.4 50.4 51.1
Minority Interest 0 0 0 0 D/E Ratio (x) 0.0 0.0 0.0 0.0
Equity Share Capital 964 964 964 964
Face Value per share (Rs) 10 10 10 10 Return/Profitability Ratio (%)
Reserves & Surplus* 2,230 2,650 3,008 3,494 Recurring Net Income Margins 12.1 13.4 14.2 14.9
Less: Misc. Exp. # 0 0 0 0 RoCE 80.4 97.8 104.2 109.9
Net Worth 3,194 3,614 3,972 4,458 RoNW 83.0 99.2 105.2 110.8
Total Liabilities 3,261 3,652 4,010 4,496 Dividend Payout Ratio 106.2 91.1 90.6 89.2

Net sales 5,962 6,122 6,554 6,526
% growth (YoY) 4.8 8.0 5.7 19.9
EBITDA 1,131 1,333 1,387 1,380
Margin (%) 19.0 21.8 21.2 21.1
Add: Extraordinaries 45 0 (53) (55)
Net profit 659 857 815 864
FMCG - 22
Equity Research
October 7, 2005
Procter & Gamble BUY
FMCG Whisper’s the right choice Rs800

Procter & Gamble Hygiene & Healthcare (PGHH) is expected to register branded
Dec Mar Jun sales growth of 16% YoY in Q1FY06E, driven by the feminine hygiene segment.
‘04 ‘05 ‘05 Despite 5% royalty, we expect operating profits to grow 13% YoY and net profit
Promoters 68.8 68.8 68.8
Institutional 18% YoY. While we remain positive on long-term growth of the sanitary napkin
investors 9.9 9.6 9.6
MFs and UTI 2.5 2.2 2.2 segment, we do not see any further short-term upside at current valuations.
FIIs
Others
2.1
21.3
2.1
21.6
2.1
21.7
f Whisper Choice drives feminine hygiene sales growth. Driven by the successful
Source: CMIE nationwide launch of Whisper Choice, the low-priced sanitary napkin variant,
PGHH’s market share has increased 360bps over the past six months to 49.1%. On
the lower base of Q1FY05, when the category sales were adversely impacted, we
expect the company’s sanitary napkin sales growth to accelerate to 25% YoY.
f Healthcare segment to register modest growth. Led by the cough lozenges
category, we expect the healthcare segment to register high single-digit growth.
Price chart While the company’s market share has improved in cough lozenges, it has lost
900 share in the cold tablet segment. Q1FY06 would be the last quarter before the
800 transfer of the contract manufacturing business. This segment is likely to contribute
700 Rs41mn to PBIT.
(Rs)
600 f Operating profits to grow 13%. Strong growth of branded business and lower
500 VAT rate of 4% on healthcare products would offset the impact of 5% royalty
400
charge on both hygiene and healthcare products. We expect the operating profit to
grow 13% YoY. With higher treasury income, we expect the net profit to grow 18%
Oct-04
Dec-04
Feb-05
May-05
Jul-05
Oct-05
YoY to Rs301mn.
f Remains a long-term play. The stock has spiked over the past quarter on the back
of transfer of the contract manufacturing business and announcement of higher
dividends. While we remain positive on the long-term growth of the sanitary napkin
segment, we do not see any further short-term upside at the current valuation.
Quarterly estimates
(Rs mn, year ending June 30)
Q1FY06E Q1FY05 YoY (%) QoQ (%) FY05 FY04 YoY (%)
Revenues 1,867 1,421 31.4 8.7 6,849 5,772 18.7
EBITDA 416 367 13.4 63.4 1,334 1,254 6.4
PBT 436 399 9.4 77.7 1,376 1,272 8.2
PAT 301 255 17.8 83.0 948 922 2.8
Market Cap Rs25.9bn/$585mn Year to June FY04 FY05P FY06E FY07E

FII (%) 2.1 Net Income (Rs mn) 973 946 1,131 1,294
Absolute Return 3m (%) 20.0 % Chg YoY 16.3 (2.7) 19.5 14.4
Absolute Return 12m (%) 62.9 CEPS (Rs) 33.5 32.3 38.8 44.0
Anand Shah
FMCG - 23
Procter & Gamble ICICI Securities
Financial summary
(Rs mn, year ending June 30) (Rs mn, year ending June 30)
FY04 FY05P FY06E FY07E FY04 FY05P FY06E FY07E
Operating Income (Sales) 5,722 6,909 7,900 8,905 Operating Cash flow 757 908 1,163 1,325
of which Working Capital changes 26 (146) (57) (18)
Exports 167 101 101 101 Capital Commitments 79 (251) (100) (100)
Domestic 5,554 6,809 7,800 8,804 Net Operating FCF 862 512 1,006 1,207
Operating Expenses 4,385 5,604 6,336 7,082 Investing Activities 716 75 45 57
EBITDA 1,336 1,305 1,565 1,823 Issue of Share Capital 108 0 0 0
% margin 23.4 18.9 19.8 20.5 Buyback of shares 0 0 0 0
Depreciation & Amortisation 116 103 127 134 Inc(Dec) in Borrowings 0 0 0 0
Gross Interest 4 0 0 0 Dividend paid (488) (734) (806) (915)
Other Income 125 175 145 157 Extraordinary Items (70) 102 0 0
Recurring PBT 1,342 1,377 1,582 1,846 Chg. in Cash & Bank 1,019 (45) 245 349
Add: Extraordinaries (70) 102 0 0 Source: Company data, i-SEC Research
Less: Taxes 350 441 451 552
- Current tax 358 431 441 542
- Deferred tax (8) 10 10 10
Net Income (Reported) 922 1,038 1,131 1,294
Recurring Net Income 973 946 1,131 1,294
Table 4: Key Ratios
Source: Company data, i-SEC Research (Year ending June 30)
FY04 FY05P FY06E FY07E
Table 2: Balance Sheet Per Share Data (Rs)
(Rs mn, year ending June 30) Diluted Recurring EPS 30.0 29.2 34.8 39.9
FY04 FY05P FY06E FY07E Diluted Recurring CEPS 33.5 32.3 38.8 44.0
Assets Dividend per share 20.0 22.0 25.0 28.0
Total Current Assets 3,860 4,161 4,648 5,209 Book Value 76.7 83.9 90.6 98.8
of which Cash & cash
equivalents 2,366 2,421 2,766 3,214 Growth Ratios (% YoY)
Current Liab. & Prov. 2,252 2,459 2,693 2,941 Operating Income 31.8 20.8 14.3 12.7
Net Current Assets 1,607 1,702 1,955 2,267 EBITDA 17.4 (2.3) 19.9 16.5
Investments of which 0 0 0 0 Recurring Net Income 16.3 (2.7) 19.5 14.4
Strategic/Group 0 0 0 0 Diluted Recurring EPS 16.3 (2.7) 19.5 14.4
Marketable 0 0 0 0 Diluted Recurring CEPS 12.5 (3.6) 20.0 13.5
Net Fixed Assets* 816 965 937 903
of which Operating Ratios (%)
Intangibles 0 0 0 0 Raw Material / Sales 46.9 49.8 50.2 49.8
Capital Work-in-Progress 14 15 15 15 SG&A / Sales 15.2 15.0 14.3 14.2
Total Assets 2,424 2,667 2,892 3,171 Other Income / PBT 9.3 12.7 9.2 8.5
Liabilities NWC / Total Assets (31.3) (26.9) (28.0) (29.9)
Borrowings 0 0 0 0 Inventory (days) 48.7 48.5 51.7 51.3
Deferred Tax Liability (67) (57) (47) (37) Receivables (days) 27.0 25.6 24.8 24.1
Minority Interest 0 0 0 0 Payable (days) 106.6 92.9 88.8 85.8
Equity Share Capital 325 325 325 325 Debt/Equity Ratio (%) (2.7) (2.1) (1.6) (1.2)
Face value per share (Rs) 10 10 10 10
Reserves & Surplus* 2,167 2,400 2,615 2,884 Profitability Ratios (%)
Less: Misc. Exp # 0 0 0 0 Rec. Net Income Margins 16.6 13.4 14.1 14.3
Net Worth 2,491 2,724 2,940 3,208 RoCE 41.8 37.2 40.7 42.7
Total Liabilities 2,424 2,667 2,892 3,171 RoNW 40.6 36.3 39.9 42.1
Source: Company data, i-SEC Research Dividend Payout 79.6 77.6 80.9 79.2
*excluding revaluation reserves; # = not written off Source: Company data, i-SEC Research

(Rs mn, year ending June 30)
Net sales 1,421 1,988 1,724 1,717
% growth (YoY) 10.6 21.7 25.6 19.5
EBITDA 367 499 280 255
Margin (%) 25.8 25.1 16.3 87
Add: Extraordinaries 64 29 (58) 219
Adj. Net profit 296 390 190 164
FMCG - 24
Equity Research
October 7, 2005
Tata Tea BUY
FMCG Tepid tea Rs831

Q2FY06 is likely to be a relatively weak quarter for Tata Tea as the 7%
appreciation of the rupee against the British pound would impact consolidated
Shareholding pattern performance. The strong branded tea sales in India and increased coffee exports
Dec Mar Jun
'04 ’05 ’05 are likely to offset Tetley’s lacklustre performance. The net profit is expected to
Promoters 29.1 28.9 28.9
Institutional
grow 11% YoY on the back of savings in interest cost. The acquisition of a
investors 42.7 43.5 44.6 specialty/ready-to-drink (RTD) tea brand in the US would be positive.
MFs and UTI 5.6 5.3 8.8
Insurance Cos.
FIIs
19.1
17.9
18.0
20.2
16.8
19.0
f Consolidated sales to decline marginally. We expect Tata Tea to register 2%
Others 28.2 27.6 26.5 decline in consolidated sales in Q2FY06E. This would be primarily due to weaker
Source: CMIE
sales environment in the UK, its largest market, and 7% appreciation of the Indian
rupee versus the British pound during the quarter. The sales decline would have
been sharper but for the strong sales of Tata Coffee, which witnessed strong export
dispatches during the quarter.
f Strong domestic branded sales to continue. The company’s market share in
Price chart India has touched 20.6% in August ’05, which is the highest level in the past five
950 years. With key brands being successfully relaunched in the earlier quarters,
double-digit growth of Tata Tea’s branded sales in the domestic market is likely to
800 be sustained in Q2FY06.
(Rs)
650 f Net profit to grow 11% YoY. Healthy branded sales in India, benefits of exiting the
South Indian plantations and increased coffee exports would offset the adverse
500
impact of lower Tetley profitability, a strong rupee and lower realisations on bulk tea
350 sales in auctions. We expect the operating profit to grow 8% YoY to Rs1.65bn. With
Oct-04
Dec-04
Feb-05
May-05
Jul-05
Oct-05
the savings in interest cost, we expect the net profit to grow 11% YoY to Rs949mn.
f Acquisition of specialty/RTD tea company in the US would be positive. Tata
Tea is the only Indian FMCG company that has a global business model with
capabilities to operate in both developed and developing markets. Acquisitions in
the US in the specialty/RTD segment would improve the geographic mix as well as
move the company up the value chain.
Consolidated estimates
Revenues 7,409 7,561 (2.0) 3.4 7,167 7,070 1.4
EBITDA 1,650 1,532 7.7 19.4 1,382 1,324 4.4
PBT 1,300 1,117 16.4 36.7 970 829 17.0
PAT 949 853 11.3 51.8 625 549 13.8
Market Cap Rs46.7bn/$1.1bn Year to March FY04 FY05 FY06E FY07E

FMCG - 25
Tata Tea ICICI Securities
Financial summary (Consolidated)
of which Working Capital changes 291 (142) (5) (34)
Exports 22,837 21,689 22,361 23,568 Capital Commitments (1,650) (1,647) (918) (534)
Operating Expenses 25,953 25,221 25,850 27,281 Investing Activities (518) 287 361 354
EBITDA 4,543 5,192 5,557 5,937 Issue of Share Capital - - 2,021 -
% margin 14.9 17.1 17.7 17.9 Buyback of shares - - - -
Depreciation & Amortisation 827 779 721 767 Inc(Dec) in Borrowings (25) (547) (4,038) (2,431)
Gross Interest 1,320 1,228 994 809 Dividend paid (656) (842) (931) (1,011)
Other Income 401 354 383 417 Others (14) 477 754 811
Recurring PBT 2,797 3,540 4,225 4,778 Extraordinary Items 277 - - -
Add: Extraordinaries 277 (404) 0 0 Chg. in Cash & Bank 347 553 610 765
Less: Taxes 906 958 1,227 1,409 Source: Company data, i-SEC Research
- Current tax 958 1,028 1,217 1,399 # The issue of share capital represents conversion of bonds of Tetley
- Deferred tax (52) (69) 10 10 to equity.
Table 4: Key Ratios
(Year ending March 31)
Table 2: Balance Sheet FY04 FY05 FY06E FY07E
(Rs mn, year ending March 31) Per Share Data (Rs)
Reported EPS 36.5 42.2 45.6 49.4
Diluted EPS (Recurring) 28.9 40.2 45.6 49.5
Assets
CEPS (Recurring) 46.2 56.7 60.3 64.3
Dividend per share 8.5 10.0 11.0 12.0
of which 952 1,505 2,115 2,880
Book Value 228.6 265.4 309.8 357.9
Cash & cash equivalents
Current Liab. & Prov. 6,548 6,943 7,245 7,551
Growth Ratios (% YoY)
Net Current Assets 2,153 2,848 3,462 4,262
Operating Income (7.4) 4.9 5.7 5.3
Investments 3,238 3,355 3,463 3,571
EBITDA 18.9 13.4 7.4 7.7
of which
Recurring Net Income 66.5 33.9 7.9 8.6
Strategic/Group 1,971 2,021 2,071 2,121
Marketable 1,266 1,333 1,391 1,449
Net Fixed Assets* 26,727 27,483 27,574 27,324
of which
Operating Ratios (%)
Intangibles 20,032 20,882 21,175 21,175
Raw Material / Sales 30.1 30.1 29.9 30.0
Capital Work-in-Progress 128 142 142 142
SG&A / Sales 29.3 41.6 40.6 40.0
Total Assets 32,118 33,686 34,499 35,157
Other Income / PBT 14.3 10.0 9.8 8.6
Liabilities
NWC / Total Assets 3.7 4.0 3.9 3.9
Borrowings 17,689 17,142 13,105 10,674
Inventory (days) 98.2 103.3 104.0 103.2
Deferred Tax Liability 738 713 703 693
Minority Interest 837 910 3,271 3,672
Payable (days) 80.7 77.9 77.4 76.2
Equity Share Capital 562 562 562 562
D/E Ratio (%) 143.4 119.7 79.3 56.5
Face value per share (Rs) 10 10 10 10
Reserves & Surplus* 13,360 15,421 17,916 20,610
Profitability Ratios (%)
Less: Misc. Exp # 506 501 496 491
Rec. Net Income Margins 5.7 7.3 7.5 7.7
Net Worth 12,854 14,920 17,420 20,118
RoCE 8.5 9.7 9.2 9.4
RoNW 14.9 17.1 15.8 14.8
Source: Company data, i-SEC Research Dividend Payout 29.5 24.9 24.1 24.3
Net sales 7,561 8,061 7,910 7,167
% growth (YoY) 7.9 (0.1) 7.8 1.4
EBITDA 1,532 1,601 1,029 1,382
Margin (%) 20.3 19.9 13.0 4.4
Add: Extraordinaries (92) 43 (375) 239
Adj. Net profit 761 781 385 625
FMCG - 26
The information and opinions in this report have been prepared by ICICI Securities Limited (ICICI Securities) and are subject to change without any notice. The
report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied
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prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in
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EQUITIES
Devesh Kumar Head of Equities +91 22 5637 7101 devesh_kumar@isecltd.com
Equity Research
Telephone : +91 22 2288 2460/70 Fax: +91 22 2288 2448
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FMCG

Sector preview ........................................................................................ FMCG - 1

Asian Paints ......................................................................................... FMCG - 5

Britannia Industries .............................................................................. FMCG - 7

GlaxoSmithKline Consumer Healthcare .............................................. FMCG - 11

Godrej Consumer Products ................................................................. FMCG - 13

Goodlass Nerolac Paints ..................................................................... FMCG - 15

Hindustan Lever................................................................................... FMCG - 17

ITC ....................................................................................................... FMCG - 19

Nestlé India .......................................................................................... FMCG - 21

Procter & Gamble ................................................................................ FMCG - 23

Tata Tea .............................................................................................. FMCG - 25

Prices as on October 7, 2005

Chart 2: Most large categories show healthy growth

Chart 3: Most companies likely to register margin expansion

Source: i-SEC Research

Chart 4: BSE FMCG Index marginally outperforms the Sensex

Britannia BUY Component of: MSCI India

Colgate-Palmolive BUY Component of: MSCI India

GSK Consumer BUY Component of: MSCI India

Godrej Consumer BUY Not a component of key indices

Goodlass Nerolac BUY Not a component of key indices

ITC BUY Component of: MSCI India, BSE Sensex, Nifty

Nestle India BUY Component of: MSCI India, BSE Sensex

P&G Hygiene BUY Not a component of key indices

Tata Tea BUY Component of: MSCI India, Nifty

Asian Paints BUY

FMCG Shades of happiness Rs519

Market Cap Rs49.8bn/US$1.1bn Year to March FY05 FY06E FY07E FY08E

Table 5: Quarterly trends

Britannia Industries BUY

FMCG Crisp quarter Rs1,225

contribution from treasury gains, amounting to Rs227mn, it is likely to be negligible

Market Cap Rs29.3bn/US$661mn Year to March FY04 FY05 FY06E FY07E

FMCG A breath of fresh air Rs257

Market Cap Rs35bn/US$790mn Year to March FY04 FY05 FY06E FY07E

Table 5: Quarterly trends

GlaxoSmithKline Consumer BUY

FMCG Margin expansion to continue Rs520

Market Cap Rs21.9bn/$494mn Year to Dec CY04 CY05E CY06E CY07E

Table 5: Quarterly trends

Godrej Consumer Products BUY

FMCG On the ascent Rs469

f Rich valuations to continue on the back of strong sustainable growth. We

Market Cap Rs26.7bn/US$603mn Year to March FY05 FY06E FY07E FY08E

Goodlass Nerolac BUY

FMCG Bright hues Rs730

method) would limit the net profit growth to 4% YoY.

Market Cap Rs18.6bn/US$420mn Year to March FY04 FY05 FY06E FY07E

Table 5: Quarterly trends

Hindustan Lever HOLD

FMCG Market share’s the buzzword Rs180

foods business and absence of negative spread on bonus debentures. We

Market Cap Rs397bn/US$9.0bn Year to Dec CY03 CY04 CY05E CY06E

FMCG Premium blend Rs126

Market Cap Rs472bn/US$10.6bn Year to March FY04 FY05 FY06E FY07E

Table 5: Quarterly trends

Nestlé India BUY

FMCG Healthy growth Rs867

location would lead to an improvement in profitability in the future. Its valuation

Market Cap Rs83.4bn/$1.9bn Year to Dec CY04 CY05E CY06E CY07E

Table 5: Quarterly trends