1. CMP 4521.90
Target Price 5110.00
ISIN: INE322A01010
May 30th
, 2015
GILLETTE INDIA LIMITED
Result Update (PARENT BASIS): Q3 FY15
BUYBUYBUYBUY
Stock Data
Sector FMCG
BSE Code 507815
Face Value / Div. Per Share 10.00
52wk. High / Low (Rs.) 4999.00/1925.05
Volume (2wk. Avg ) 890
Market Cap ( Rs in mn ) 147368.72
Annual Estimated Results (A*: Actual / E*: Estimated)
Years FY14A FY15E FY16E
Net Sales 17497.90 19613.20 21574.52
EBITDA 1140.00 2242.89 2587.63
Net Profit 514.20 1167.40 1370.36
EPS 15.78 35.82 42.05
P/E 286.60 126.24 107.54
Shareholding Pattern (%)
1 Year Comparative Graph
GILLETTE INDIA LTD BSE SENSEX
Highlights
Gillette India Limited offers personal grooming, oral
care, and portable power products in India and
internationally.
The company’s Net Sales was at Rs. 4941.40 million
for the Mar quarter of FY15 compared to Rs. 4555.00
million in corresponding quarter of previous year,
registered a robust growth of 8.48% y-o-y.
In Q3 FY15, PAT or Net Profit grew by 262.74% y-o-y
and stood at Rs. 307.60 million compared to Rs.
84.80 million in Q3 FY14.
During the March quarter, Profit before interest,
depreciation and tax is Rs. 550.70 million as against
Rs. 224.30 million in the corresponding period of the
previous year.
In Q3 FY15, Profit before Tax (PBT) ramps up by
213.43% to Rs. 438.80 million from Rs. 140.00
million in Q3 FY14.
For Q3 FY15, Sales in grooming portfolio were up by
9% to Rs. 3555.10 million from Rs. 3247.00 million
for the corresponding quarter of previous year.
In Q3 FY15, Oral Care and Portable Power business
delivered sales growth of 6% & 4% of Rs. 1168.90
million and Rs. 217.40 million respectively compared
to prior period of previous year.
Net profit grew by 146.11% to Rs. 853.00 million for
the end of 9M FY15 from Rs 346.60 million for the
end of 9M FY14.
Net Sales and PAT of the company are expected to
grow at a CAGR of 15% & 16% over 2013 to 2016E
respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Gillette India Ltd 4521.90 147368.72 15.78 286.60 22.90 150.00
Colgate Palmolive Ltd 2000.55 272060.40 41.10 48.68 23.48 2400.00
Procter & Gamble Hygiene & Health Care LTD 6366.25 206653.20 101.34 62.82 20.61 275.00
Godrej Consumer Products Ltd 1074.00 365640.00 19.22 55.88 9.94 550.00
2. ANALYSIS & RECOMMENDATION - ‘BUY’
Gillette India Limited reported 8.74% rise in total Income (including other income) in its 3rd quarter March
results. Total Income stood at Rs. 5006.40 million compared to Rs. 4603.80 million in corresponding quarter of
previous year. Growth in sales was seen across all business segments – Grooming (9%), Oral Care (6%) &
Portable Power (4%). The company reported Operating Profit or EBDITA of Rs. 550.70 million in Q3 FY15
compared to Rs. 224.30 million in Q3 FY14. In the same Mar quarter of FY15, Profit after Tax Jumps to 262.74%
y-o-y of Rs. 307.60 million compared to Rs. 84.80 million in the same period previous year. Net profit of the
company has shown a three digit growth performance behind productivity driven cost .savings and operational
excellence. For the nine months ended of FY15, the company registered a growth of 12.80% in Net sales to Rs.
14325.90 million from Rs. 12700.70 million for the nine months ended of FY14. Net profit grew by 146.11% to
Rs. 853.00 million for the end of 9M FY15 from Rs 346.60 million for the end of 9M FY14.Gillette, Oral-B &
Duracell have strong brand recall & command significant market share in their respective categories. Thus, we
recommend ‘BUY’ for ‘Gillette India Ltd’ with a target price of Rs. 5110.00 for medium term investment.
QUARTERLY HIGHLIGHTS (PARENT BASIS)
Results updates- Q3 FY15,
Gillette India Limited Is one of India’s well known FMCG companies that has its portfolio Gillette Mach 3 Torbo,
Oral-B and Duracell is a World leading brands. Reported its financial result for the quarter ended 31st Mar, 2015.
The company’s Net profit Jumps to Rs. 307.60 million against Rs. 84.80 million in the corresponding quarter of
previous year, an increase of 262.74% y-o-y. Net Sales of Rs. 4941.40 million for the March quarter of FY15
compared to Rs. 4555.00 million for the corresponding quarter of previous year. Driven by the company’s focus
on innovation, net sales increased a growth of 8.48% y-o-y with a robust growth across all segments including
Grooming, Oral Care and portable power. Profit before interest, depreciation and tax is Rs. 550.70 million, an
increase of 145.52% y-o-y as against Rs. 224.30 million in the corresponding period of the previous year. For the
March quarter, Reported earnings per share of the company stood at Rs. 9.44 a share, registering 262.74%
increase over previous year period.
Rs. In Mn Mar-15 Mar-14 % Change
Net Sales 4941.40 4555.00 8.48
PAT 307.60 84.80 262.74
EPS 9.44 2.60 262.74
EBITDA 550.70 224.30 145.52
3. Break Up of Expenditure
(Rs. In Million) Q3 FY15 Q3 FY14 CHNG %
Cost of raw & packing materials consumed 1057.50 1097.60 -4%
Purchase of stock-in-trade 1022.10 1138.60 -10%
Employees Benefit Expenses 312.80 176.40 77%
Depreciation and amortization 105.60 79.80 32%
Advertising & sales promotion expenses 1167.10 1238.40 -6%
Other Expenditure 734.60 763.70 -4%
Segment Revenue
Rs. In Mn Q3 FY15 Q3 FY14 CHNG %
Grooming 3555.10 3247.00 9%
Portable power 217.40 208.30 4%
Oral Care 1168.90 1099.70 6%
4. COMPANY PROFILE
Gillette India Limited offers personal grooming, oral care, and portable power products in India and
internationally. It provides personal grooming products, such as blades, razors, and toiletries under the Gillette
brand; oral care products, including tooth brushes and other oral care products under the Oral-B brand; and
portable power products comprising batteries under the Duracell brand. The company, formerly known as
Indian Shaving Products Limited, was incorporated in 1985 and is based in Mumbai, India. Gillette India Limited
is a subsidiary of Procter & Gamble India Holdings B.V.
P&G entered India in 1988, and now serves over 650 mm consumers across India. The company presence in
household, beauty, grooming and health care segments. Acquired Gillette India in 2005 – Fully integrated with
P&G’s strategies & values P&G operates two listed entities (Gillette India Limited and Procter & Gamble Hygiene
& Health Care Limited) & one wholly owned subsidiary (Procter & Gamble Home Products Limited) in India.
Products
• Personal grooming- blades & razors
• Oral care
• Portable power
5. Financial Statements & Estimations (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance sheet as at June 30, 2013A- 2016E
2013A 2014A 2015E 2016E
EQUITY AND LIABILITIES:
Shareholders’ Funds:
Share Capital 325.90 325.90 325.90 325.90
Reserves and Surplus 6166.40 6108.70 6719.57 7324.33
1) Sub Total - Net worth 6492.30 6434.60 7045.47 7650.23
Non-Current Liabilities:
Deferred Tax Liabilities [Net] 64.00 23.50 10.58 5.82
Other Long Term Liabilities 0.20 0.20 0.20 0.20
Long Term Provisions 15.00 21.60 24.62 27.09
2) Sub Total - Non Current Liabilities 79.20 45.30 35.40 33.10
Current Liabilities:
Trade Payables 2236.70 2560.50 2893.37 3182.70
Other Current Liabilities 653.40 515.80 533.34 544.00
Short Term Provisions 928.70 984.40 610.33 384.51
3) Sub Total - Current Liabilities 3818.80 4060.70 4037.03 4111.21
Total Liabilities (1+2+3) 10390.30 10540.60 11117.90 11794.55
ASSETS:
Non-Current Assets:
Fixed Assets:
Tangible Assets 1702.10 1726.30 1771.18 1799.52
Capital work-in-progress 297.80 608.40 797.00 940.46
a) Sub Total - Fixed Assets: 1999.90 2334.70 2568.19 2739.99
b) Long Term Loans and Advances 1014.80 1237.90 1435.96 1608.28
4) Sub Total - Non-Current Assets 3014.70 3572.60 4004.15 4348.27
Current Assets:
Inventories 2397.30 2305.50 2503.77 2618.95
Trade Receivables 927.00 922.60 929.98 948.58
Cash and Bank Balances 1668.20 1696.10 908.23 935.48
Short Term Loans and Advances 2183.10 1975.80 2696.97 2862.49
Other Current Assets 200.00 68.00 74.80 80.78
5) Sub Total - Current Assets 7375.60 6968.00 7113.75 7446.28
Total Assets (4+5) 10390.30 10540.60 11117.90 11794.55
6. Annual Profit & Loss Statement for the period of 2013 to 2016E
Value(Rs.in.mn) FY13A FY14A FY15E FY16E
Description 12m 12m 12m 12m
Net Sales 14377.20 17497.90 19613.20 21574.52
Other Income 365.50 316.20 361.40 451.75
Total Income 14742.70 17814.10 19974.60 22026.27
Expenditure -13046.80 -16674.10 -17731.70 -19438.64
Operating Profit 1695.90 1140.00 2242.89 2587.63
Interest -0.20 -3.60 -46.98 -60.13
Gross profit 1695.70 1136.40 2195.92 2527.50
Depreciation -313.20 -329.80 -416.79 -466.80
Profit Before Tax 1382.50 806.60 1779.13 2060.69
Tax -510.90 -292.40 -611.73 -690.33
Net Profit 871.60 514.20 1167.40 1370.36
Equity capital 325.90 325.90 325.90 325.90
Reserves 6166.40 6108.70 6780.66 7324.33
Face value 10.00 10.00 10.00 10.00
EPS 26.74 15.78 35.82 42.05
Quarterly Profit & Loss Statement for the period of 30th Sept 2014 to 30th June, 2015E
Value(Rs.in.mn) 30-Sep-14 31-Dec-14 31-Mar-15 30-Jun-15E
Description 3m 3m 3m 3m
Net Sales 4399.80 4984.70 4941.40 5287.30
Other income 156.60 56.60 65.00 83.20
Total Income 4556.40 5041.30 5006.40 5370.50
Expenditure -4172.90 -4318.10 -4455.70 -4785.00
Operating profit 383.50 723.20 550.70 585.49
Interest -24.00 -13.40 -6.30 -3.28
Gross profit 359.50 709.80 544.40 582.22
Depreciation -85.00 -118.90 -105.60 -107.29
Profit Before Tax 274.50 590.90 438.80 474.93
Tax -97.70 -222.30 -131.20 -160.53
Net Profit 176.80 368.60 307.60 314.40
Equity capital 325.90 325.90 325.90 325.90
Face value 10.00 10.00 10.00 10.00
EPS 5.42 11.31 9.44 9.65
8. Outlook and Conclusion
At the current market price of Rs.4521.90, the stock P/E ratio is at 126.24 x FY15E and 107.54 x FY16E
respectively.
Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.35.82 and
Rs.42.05 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 16% & 15% over 2013 to 2016E
respectively.
On the basis of EV/EBITDA, the stock trades 65.30 x for FY15E and 56.59 x for FY16E.
Price to Book Value of the stock is expected to be at 20.92 x and 19.26 x respectively for FY15E and FY16E.
We recommend ‘BUY’ in this particular scrip with a target price of Rs.5110.00 for Medium to Long term
investment.
Industry Overview
The Indian FMCG sector is around $15 Billion and continues to grow at a healthy pace, though it has slowed
down versus the historical growth rate. The long term prospects remain bright. There is significant opportunity
to grow penetration, trial and consumption. Has strong Indian companies and major multinationals operating in
this area offering a wide array of products to the Indian consumer.
MALE GROOMING — BLADES & RAZOR
Blades & Razor sector is a big category and represents a sizable growth opportunity for this Company. The
Blades & Razors market size is estimated at over Rs. 20000.00 mn. The strong portfolio and outstanding equity of
Gillette has helped us deliver another year of robust double digit growth and record shares.
ORAL CARE
The Oral Care category which is over Rs.100000.00 mn presents significant opportunities as well as challenges in
India. The Oral Care business delivered over 30% topline growth versus last year driven by product innovations
including launch of Oral-B toothpaste and focus on brand fundamentals. The Company’s entry into the
toothpastemarket is delivering results in line with expectations but will require significant investment.
PORTABLE POWER
The growing usage in the high and mid drain devices like toys and cameras and increased purchasing power in
India indicate a good potential in the coming years for alkaline batteries and thus for Duracell. Sales in this
segment were up more than 20% versus last year.
9. Outlook, Risks and Opportunities
The Indian economy presents significant opportunity with a growing population, category whitespace and rising
incomes. We do expect growth rate in the categories we compete to be around high single digits. However, high
inflation, supply bottlenecks and intense competition present significant near term challenges. The Company
endeavors to overcome these risks and to sustain and improve its market position behind superior innovation,
strategic pricing, effective communication and by focusing relentlessly on productivity.
Conclusion
While the rural market certainly offers a big attraction to marketers, it would be naïve to think that any company
can enter the market without facing any problems and walk away with a sizable share. Distribution is the most
important variable in the marketing plans of most consumer goods manufacturers, because managing such a
massive sales and distribution network is in itself a huge task.
This sector will continue to see growth as it depends on an ever-increasing internal market for consumption, and
demand for these goods remains more or less constant, irrespective of recession or inflation. Hence this sector
will grow, though it may not be a smooth growth path, due to the present world-wide economic slowdown, rising
inflation and fall of the rupee. This sector will see good growth in the long run and hiring will continue to remain
robust.
The Indian economy is showing positive signals of regaining growth momentum, especially in core areas of
Manufacturing and Infrastructure. However, the weaker than expected monsoon is an area of worry and could
impact growth as well as consumption. The recent stability in the rupee is welcome news as it enables the
economic recovery.
Disclaimer:
This document is prepared by our research analysts and it does not constitute an offer or solicitation for the
purchase or sale of any financial instrument or as an official confirmation of any transaction. The information
contained herein is from publicly available data or other sources believed to be reliable but we do not represent that
it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be
in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for
the recipients’ investment decision based on this document.
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