Recommendations From Personal Care Sector
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This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.
HERE IS WHY
Strong financial performance
Wide product reach
Debt free company
India’s FMCG sector is the fourth largest sector in the economy and is an important contributor to India’s GDP. It has been growing at a robust pace and is estimated to reach USD 49 billion in 2016. Despite the economic slowdown over the past few years, the FMCG industry has remained resilient and delivered more returns than most sectors. Some of the new emerging trends that will drive demand going forward include growth in disposable incomes, increased urbanisation, favourable changes in government policies, simplification, infrastructure development, consumers of FMCG products getting increasingly digitally influenced and the exponential growth of e-commerce.
Gillette India (GIL) is engaged in manufacturing and selling of branded packaged fast moving consumer goods in the three segments of grooming, portable power and oral care businesses. It has manufacturing plants at Bhiwadi in Rajasthan and Baddi in Himachal Pradesh, apart from third party manufacturing locations spread across India.
On the financial front, GIL’s topline increased by 10.74 per cent CAGR from FY12 to FY16. The company’s EBITDA too rose 24.77 per cent over the last five fiscal years ending with FY16. Its bottomline was also bolstered by CAGR of 22.98 per cent in FY12-FY16.
GIL follows May-June as a financial year for accounting purpose. Its net sales increased 4.03 per cent to Rs.2053 crore in FY16 as compared to previous financial year. The company’s EBITDA boosted by 69.96 per cent to Rs.324 crore in FY16 on a yearly basis. GIL’s net profit also rose 34.72 per cent to Rs.213 crore in FY16 as compared to previous fiscal year. GIL enjoys debt free status. The company’s ROE and ROCE stood at 26.63 per cent and 41.4 per cent in FY16. Considering the latest financials, GIL’s revenue increased 6.74 per cent to Rs.412 crore in Q1FY17 as compared to same period in the previous financial year.
Its EBITDA boosted by 63.83 per cent to Rs.80.44 crore in Q1FY17 on a yearly basis. GIL’s net profit also increased 63.46 per cent to Rs.54.84 crore in Q1FY17 as compared to the same period in previous fiscal. On the segmental revenue front, GIL has earned 74.52 per cent from the grooming segment, 4.55 per cent from portable power and remaining 20.94 per cent from oral care segment in Q1FY17.
The company has earned 96.9 per cent from within India and remaining 3.1 per cent from outside India in Q1FY17. On the valuation front, GIL’s share price is trading at a PE multiple of 59.71 times, which is high compared to industry PE multiple of 37.4 times. The company has given dividend yield of 0.92 per cent in FY16
