GICS Industry : Food Products l Sub Industry : Packaged foods & meats l Website : www.gsk-ch.in GSK Consumer Healthcare Ltd Key Stock Indicators NSE Ticker : GSKCONS Bloomberg Ticker : SKB:IN Face value / Share: 1. Div. Yield (%):.9 CMP (as on 28 Jan 211 Rs/Share) 224.8 2-weekrange up to 28 Jan 211 (Rs)(H/L): 239.1/1283.2 Market Cap as on 28 Jan 211 (Rs Mn): 8,14 Enterprise Value as on 28 Jan 211 (Rs Mn): 76,96 Shares outstanding (mn): 42.1 Free Float (%): 6.8 Average daily volumes (12 months) : 17,98 Beta (2 year) :.6 GlaxoSmithKline Consumer Healthcare (GSKCH) is an associate of GlaxoSmithKline Plc (UK). The parent company was formed in 2, following the merger between GlaxoWellcome and SmithKline Beecham. GSKCH s product portfolio consists of nutritional products such as Horlicks, Boost and Maltova, and also drugs such as rubefacients (Iodex) and gastrointestinal/ analgesics such as Crocin and Eno. KEY HIGHLIGHTS Product portfolio has strong brands GSKCH s product portfolio consists of nutritional brands such as Horlicks, Boost and Maltova, while it has rubefacients like Iodex and gastrointestinal/ analgesics brands like Crocin and Eno. Horlicks is a well-know brand in the white segment of the health food drinks industry and contributes significantly to its market share there. Extension of product line The company s R&D function has fostered the development of new products through innovation. Products introduced in 29 include Glaxo Nutrition's ActiGrow, Horlicks Nutribar, Junior Horlicks, biscuits, Asha from Horlicks, Horlicks Cornflake Crunchies Biscuits, Foodles from Horlicks and Horlicks Proheight. GSKCH is a part of GlaxoSmithKline Plc of the UK, which has a 27% market share in the global pharmaceutical market. Exports drive growth The Company exports products to Bangladesh, Myanmar, Sri Lanka, Malaysia, to the Middle East and other markets. Efforts are also being made to target markets in Southeast Asia. Exports registered a CAGR of 36.17% from CY6 to CY9. Exports contributed ~8% of the total revenue CY9. Key Financial Indicators Dec-7 Dec-8 Dec-9 Revenue (Rs mn) 13,131.9 1,893.8 19,8.7 EBITDA margins (%) 2. 18.3 18.9 PAT (Rs mn) 1,626.8 1,883.3 2,327.8 PAT margins(%) 12.4 11.8 11.8 Gearing (x) - - - EPS (Rs/share) 38.7 44.8.4 PE (x) 19.1 12.7 36.6 P/BV (x) 4.9 3.2 9.4 RoCE (%) 41.6 4.4 43.6 RoE (%) 27.9 27. 28. EV/EBITDA (x) 11.2 6.6 n.m. : Not meaningful 2.6 Shareholding (As on September 3, 21) FII 11% DII 19% Others 27% KEY RISKS Expiry of drug patents Drug price control order (DPCO) imposed by Government of India Stock Performances vis-à-vis market Indexed price chart Promoter 43% Returns (%) YTD 1-m 3-m 12-m GSKCONS 1-9 -8 2 NIFTY 7-7 -7 1 Note: 1) YTD returns are since Jan 4, 21 to Jan 28, 211. 2) 1-m, 3-m and 12-m returns are up to Jan 28, 211. (index) 2 18 16 14 12 1 8 6 4 2 Jan-1 Feb-1 Mar-1 Apr-1 May-1 Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 (') 18 16 14 12 1 8 6 4 2 Volumes (RHS) GSKCONS NIFTY CRISIL COMPANY REPORT 1
BACKGROUND GSKCH is the Indian associate of GlaxoSmithKline Plc (UK). Its product portfolio consists of nutritional products such as Horlicks, Boost and Maltova, while on the pharma side, it has rubefacients like Iodex and gastrointestinal/ analgesics like Crocin and Eno. The company has manufacturing facilities at Nabha in Punjab, Rajahmundry in Andhra Pradesh and Sonepat in Haryana. It has an established distribution network in India. GSKCH exports to Bangladesh, Myanmar, Sri Lanka, Malaysia, and the Middle East. Exports contributed ~8% of total revenue for CY9. The company s R&D division has helped develop new products, including 29 s launches such as Glaxo Nutrition's ActiGrow, Horlicks Nutribar etc. COMPETITIVE POSITION Peer Comparison GlaxoSmithKline Consumer Healthcare Ltd Nestle India Ltd REI Agro Ltd annia Industries Ltd Dec-9 Dec-9 Mar-1 Mar-1 Revenue (Rs mn) 19,8.7 1,23. 36,932.3 37,871.9 EBITDA margins (% 18.9 19.8 16.3 4. PAT (Rs mn) 2,327.8 6,. 1,71.7 1,33.2 PAT margins(%) 11.8 12.7 4.3 2.7 Gearing (x) -..2 3.9 EPS (Rs/share).4 74.8 2.6 43.2 PE (x) 36.6 48.4 1.1 9. P/BV (x) 9.4 41.2 1.1.3 RoCE (%) 43.6 12.4 1.8 14.1 RoE (%) 28. 124.1 18.2 24.7 EV/EBITDA (x) 2.6 34.1 1.9 1. n.m: Not meaningful FINANCIAL PROFILE Top-line and PAT grow in FY1, operating margin stays flat The company s top-line grew 22.8% CAGR from CY7 to CY9 on the back of price increases and volume growth. EBITDA margin remained flat as costs rose in proportion to increase in revenues. PAT increased by 23.6 % in CY9 to Rs 2.3 bn, helped by reduction in operating expenses as a result of efficient operations. Key Financial Indicators Units Dec-7 Dec-8 Dec-9 Revenue Rs million 13,131.9 1,893.8 19,8.7 EBITDA margins 2. 18.3 18.9 PAT Rs million 1,626.8 1,883.3 2,327.8 PAT margins 12.4 11.8 11.8 Revenue growth 14.4 21. 24.6 EBITDA growth 24. 8. 29. PAT growth 4.8 1.8 23.6 Gearing Times... RoCE 41.6 4.4 43.6 RoE 27.9 27. 28. CRISIL COMPANY REPORT 2
INDUSTRY PROFILE Pharmaceuticals Over the past five years, the Indian pharmaceutical industry grew at a CAGR of about 22-24 per cent and reached a market size of about $21.4 billion in 29-1. The industry is dominated by exports which are estimated to have contributed about 6 per cent to the industry in 29-1. The strong growth in the Indian pharmaceuticals industry has been primarily driven by exports of formulations and bulk drugs while the domestic formulations market has maintained its steady growth. Between 24- and 29-1, formulation exports have surged at a CAGR of -27 per cent owing to the opening-up of a huge generic opportunity in regulated market while demand from the semi-regulated market remained robust. In the domestic market, the emergence of lifestyle segments such as anti-diabetic, cardiovascular and gastrointestinal have been chief growth (12-14 per cent) drivers over the last 4- years. Bulk drug exports have grown at a compounded rate of 34-3 per cent over the last five years to an estimated $7. billion in 29-1. Indian companies have the advantage of lower costs and well-developed process chemistry skills (employee and manufacturing costs) as compared to companies in US and Europe. Indian players are increasingly focusing on exports to generic players and innovators in regulated markets. Branded Foods The branded foods industry includes units manufacturing bakery products, dairy and milk products, confectioneries and ready-to-eat products. While India ranks among the largest food producers in the world, its share in the processed food industry is miniscule, reflecting the low penetration levels and inadequate supply chain infrastructure. India, however, has an abundant supply of the raw materials as it is one of the world`s largest producers of milk, food grains, fruits, vegetables, spices, sugar and oilseeds. Demand growth in the branded foods industry depends on the ability of manufacturers to offer a wide range of products that meet regional tastes at competitive prices. Increase in the level of penetration, especially in urban areas, will depend primarily on the growth in income levels and the number of working women. Government policies do not have a large bearing on the branded foods industry. Policy changes have, however, largely been supportive to the growth of the sector. The industry was accorded priority status for bank lending in 1999. Organised players in the branded foods industry face stiff competition from regional brands. Imported food products are costlier than local equivalents and are, therefore, not competitive in the domestic market. CRISIL COMPANY REPORT 3
ANNUAL RESULTS Income Statement Balance sheet (Rs million ) Dec-7 Dec-8 Dec-9 (Rs million ) Dec-7 Dec-8 Dec-9 Net Sales 12,74. 1,429.6 19,248.7 Equity share capital 42.6 42.6 42.6 Operating Income 13,131.9 1,893.8 19,8.7 Reserves and surplus,947. 7,138.3 8,626.6 Tangible net worth 6,367. 7,8.9 9,47.1 EBITDA 2,686.3 2,91.2 3,741.3 Deferred tax liablity: asset 172.8 6.8-11.1 EBITDA Margin 2. 18.3 18.9 Long-term debt... Short-term-debt... Depreciation 434.9 419. 42.2 Total debt... Interest 8.9 18.9 4.4 Current liabilities 2,181. 2,.2 3,89.6 Other Income 293.7 438. 336.3 Total provisions 3.7 617.1 1,294.7 Total liabilities 9,27. 1,742. 14,41.3 PBT 2,41.4 2,84.9 3,64.7 Gross block 4,72.6 4,73. 4,92.6 PAT 1,626.8 1,883.3 2,327.8 Net fixed assets 2,337.4 2,21.7 2,318.8 Investments 2,978.3.. PAT Margin 12.4 11.8 11.8 Current assets 3,711.3 8,26.3 11,722. Receivables 273.6 432. 313.6 No. of shares (Mn No.) 42.1 42.1 42.1 Inventories 1,948.2 2,771.7 2,66.3 Cash 936.7 4,79.8 8,198. Earnings per share (EPS) 38.7 44.8.4 Total assets 9,27. 1,742. 14,41.3 Cash flow Ratio (Rs million ) Dec-7 Dec-8 Dec-9 Dec-7 Dec-8 Dec-9 Pre-tax profit 2,486.2 2,9.9 3,611.9 Revenue growth (%) 14.4 21. 24.6 Total tax paid -892. -1,64. -1,412.9 EBITDA growth(%) 24. 8. 29. Depreciation 434.9 419. 42.2 PAT growth(%) 4.8 1.8 23.6 Change in working capital 1. -411.3 2,279. EBITDA margins(%) 2. 18.3 18.9 Cash flow from operating activities 2,13.6 1,844.6 4,898.2 Tax rate (%) 36.4 37. 39.6 Capital Expenditure -289.4-1.7-477.3 PAT margins (%) 12.4 11.8 11.8 Investments and others -781. 2,978.3. Dividend payout (%) 31. 33. 32. Cash flow from investing activities -1,7.9 2,726.6-477.3 Return on Equity (%) 27.9 27. 28. Equity raised/(repaid)... Return on capital employed (%) 41.6 4.4 43.6 Debt raised/(repaid)... Dividend (incl. tax) -9.4-738. -88.7 Gearing (x)... Others (incl extraordinaries) -34.8-6. -47.1 Interest coverage (x) 4.6 13.7 82.4 Debt/EBITDA (x)... Cash flow from financing activities -6.2-798. -932.8 Change in cash position 47. 3,773.2 3,488.1 Asset turnover (x) 2.9 3.4 4.1 Opening cash 479.2 936.7 4,79.8 Current ratio (x) 2.7 2.7 2.3 Closing cash 936.7 4,79.8 8,198. Gross current assets (days) 13 194 214 QUARTERLY RESULTS Profit and loss account (Rs million) Sep-1 % of Rev Sep-9 % of Rev Jun-1 % of Rev Sep-1 % of Rev Sep-9 % of Rev No of Months 3 3 3 9 9 Revenue 6,49.8 1.,163.2 1.,64.1 1. 18,826.1 1. 1,79.7 1. EBITDA 1,284.7 19.9 998.4 19.3 1,174. 2.8 4,. 21.4 3,41.7 21.7 Interest 7.3.1 9.9.2 6.2.1 19.2.1 33.6.2 Depreciation 99.6 1. 1. 2. 92.8 1.6 288.1 1. 316.4 2. PBT 1,177.8 18.2 883. 17.1 1,7. 19. 3,718.2 19.8 3,6.7 19. PAT 78.7 12.2 6.2 11.6 717. 12.7 2,464.8 13.1 1,991. 12.7 CRISIL COMPANY REPORT 4
FOCUS CHARTS & TABLES Rs mn 8, 7, 6,, 4, 3, 2, 1, Dec-7 Mar-8 Sales Quarterly sales & y-o-y growth Jun-8 Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Sales growth y-o-y (RHS) 3 3 2 1 1 Rs mn 1,2 1, 8 6 4 2 Dec-7 Mar-8 Quarterly PAT & y-o-y growth Jun-8 Net Profit Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Net profit growth y-o-y (RHS) 6 4 3 2 1 Rs/share EPS 3 Movement in operating and net margins 2 1 1 2 1 1 Dec-7 Mar-8 Jun-8 Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-7 Mar-8 Jun-8 OPM Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 NPM Jun-1 Sep-1 Shareholding Pattern () Board of Directors Mar 21 Jun 21 Sep 21 Dec 21 Director Name Promoter 43.2 43.2 43.2 43.2 Simon James Scarff (Mr.) FII 9.6 1.2 1.9 11.3 DII 21.7 2. 19.8 18.9 Zubair Ahmed (Mr.) Others. 26.1 26.2 26.6 Subodh K. Bhargava (Mr.) Mukesh Hari Butani (Mr.) Naresh Dayal (Mr.) Designation Non-Executive Chairman, Promoter- Director Managing Director P. Dwarakanath (Mr.) Praveen Kumar Gupta (Mr.) Director Kunal Kashyap (Mr.) Ramakris hnan Subramanian (Mr.) Director Additional Disclosure This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT). Disclaimer This report is based on data publicly available or from sources considered reliable. CRISIL Ltd. (CRISIL) does not represent that it is accurate or complete and hence, it should not be relied upon as such. The data / report is subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this report. Nothing in this report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber / user assume the entire risk of any use made of this data / report. CRISIL especially states that, it has no financial liability whatsoever, to the subscribers / users of this report. This report is for the personal information only of the authorised recipient in India only. This report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person especially outside India or published or copied in whole or in part, for any purpose. CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters / distributors of this report. For information please contact 'Client Servicing' at +91-22-3342361, or via e-mail: clientservicing@crisil.com. CRISIL COMPANY REPORT