GlaxoSmithKline Consumer Healthcare: Recommendation Review
4/19/2012 9:00 PM Thursday
We had recommended GSK Consumer Healthcare to our investors in DSIJ Vol. 27, Issue No. 3 (dated January 16-29, 2012), when the scrip was trading at Rs 2462. The first and foremost factor for our recommendation was its ability to perform well in difficult times. Other compelling factors included its consistent dividend paying status, the leadership position in the malted food drinks (MFD) market, the anticipated double digit growth in the MFD segment and the expected improvement in the company’s penetration in the northern markets. Further, its debt-free status was an additional advantage.
After our recommendation, the scrip has moved up and is trading at Rs 2830, providing an appreciation of 11.50 per cent. In its December 2011 quarter results and the CY11 results (December closing), the company’s financial performance has been very good. On a quarterly basis, its topline increased to Rs 624.79 crore and the bottomline to Rs 59.10 crore as compared to Rs 524.19 crore and Rs 53.37 crore respectively in December 2010. On a yearly basis too, the topline stood at Rs 2770.68 crore and the bottomline at Rs 355.21 crore for CY11 as against Rs 2373.75 crore and Rs 299.85 crore in CY10. The company has also announced a dividend of Rs 35 per share (X-Div) for CY11.
We are of the opinion that with a healthy capital expenditure of Rs 200 crore in CY11, the company is looking at expansion. Volume growth is expected, and we feel that its performance should be good. However, we opine that the scrip has moved up fast, and hence, booking partial profits seems to be a good idea.
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