1

SYNOPSIS

Godrej Consumer Products (GCPL) is

a flagship company of Godrej Group.

During the quarter ended, the

robust growth of revenue is

increased by 55.44% Rs.10030.30

million.

GCPL International business stood

at Rs.360 crore, growing at 93%.

During the quarter, the Company

has entered into an agreement to

acquire 51% stake in Darling group

holdings.

ICRA has assigned to GCPL rating of

"A1+" (pronounced as A one plus) for

the Company's non convertible

debenture programme of Rs. 200

crore.

Net Sales and PAT of the company

are expected to grow at a CAGR of

36% and 27% over 2010 to 2013E

respectively.

Years Net sales EBITDA Net Profit EPS P/E

FY 11 36642.10 7136.30 5147.10 15.91 24.19

FY 12E 44703.36 8262.63 5941.75 18.36 20.95

FY 13E 51855.90 9619.29 6905.01 21.34 18.03

Stock Data:

Sector: FMCG

Face Value Rs. 1.00

52 wk. High/Low (Rs.) 479.70/325.20

Volume (2 wk. Avg.) 32937

BSE Code 532424

Market Cap (Rs.In mn) 135960.54

Share Holding Pattern

1 Year Comparative Graph

Godrej Consumer BSE SENSEX

C.M.P: Rs. 420.15 Target Price: Rs. 475.00 Date: Aug 18th 2011 BUY

Godrej Consumer Products Ltd Result Update: Q1 FY 12

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Peer Group Comparison

Name of the company CMP(Rs.) Market

Cap.(Rs.Mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

Godrej Consumer 420.15 135960.54 14.63 28.72 8.86 450.00

ITC 194.40 1505651.60 6.78 28.67 9.47 445.00

HUL 313.65 677158.20 11.11 28.23 25.73 650.00

Marico 153.00 94341.50 5.36 28.54 10.77 66.00

Investment Highlights

Q1 FY12 Results Update

Godrej Consumer products reported a rise of 55.44% net sales for the quarter

ended June 2011. During the quarter, the company disclosed a net profit of Rs.

2392.90 million as against of Rs.1163.90 million for the quarter ended June, 2010.

Net sales are increased by 55.44% to Rs.10030.30 million from Rs. 6452.80 million

in the same quarter previous year. In the same period, total income of the company

was at Rs. 10215.90 million, a rise of 56.28% over the prior year period. Company

EPS is stood at Rs.7.39 for the quarter ended June 2011.

Quarterly Results - Consolidated (Rs in mn)

As At Jun-11 Jun-10 %change

Net sales 10030.30 6452.80 55.44

PAT 2392.90 1163.90 105.59

Basic EPS 7.39 3.78 95.81

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� Break up of expenditure

� Declared dividend

Godrej Consumer Products Ltd has declared an interim dividend @ Re. 1/- per

share (100% on the shares of the face value of Re. 1/- each) for the financial year

2011-12.

� Acquire stake in Darling

During the quarter, the Company has entered into an agreement to acquire 51%

stake in Darling group holdings. Africa Darllng Group Is a market leader in hair

extension products.

� Scheme of Amalgamation

Godrej Consumer Products Ltd has the Order of the Hon'ble High Court of

Judicature at Bombay sanctioning the Scheme of Amalgamation of Essence

Consumer Care Private Ltd and Naturesse Consumer Care Private Ltd with Godrej

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Consumer Products Ltd. ECCPPL and NCCPPL, both 100% subsidiaries of GCPL,

are merged with GCPL.

Company Profile

Godrej Consumer Products Ltd.(GCPL) is a major player in the Indian FMCG market

with leadership in personal, hair, household and fabric care segments. The company

employs 950 people and has three state-of-the-art manufacturing facilities at

Malanpur (M.P.) Guwahati (Assam) and Baddi (H.P.).Their focus is on providing their

customers with innovative, value for money solutions for meeting their daily needs and

improving the quality of their life. This is achieved through the brands the company

markets. They are among the largest marketer of toilet soaps in the country with

leading brands such as CINTHOL, FAIRGLOW, GODREJ NO 1 . Their FAIRGLOW

brand, India's first Fairness soap, has created marketing history as one of the most

successful innovations. product range from Godrej Renew Coloursoft Liquid Hair

Colours, Godrej Liquid & Powder Hair Dyes to Godrej Kesh Kala oil, Nupur based Hair

Dyes. They are also the preferred supplier for contract manufacturing of toilet soaps

for some of the most well-known brands in the country.

Business Area

The company operates in two divisions – Soaps and personal care. The company is the

market leader in hair colours and liquid detergents. GCPL has 9.7% market share in

toilet soaps with Cinthol, Fairglow and No.1 as its key brands. Godrej No.1 has

emerged as the largest selling grade one soap in India.

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Subsidiaries:

1. Keyline Brands Ltd

2. Rapidol (Pty.) Ltd.

3. Kinky Group (Pty.) Ltd.

4. Godrej Global Mideast FZE

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Financial Results

12 Months Ended Profit & Loss Account (Consolidated)

Value(Rs.in.mn) FY10 FY11 FY12E FY13E

Description 12m 12m 12m 12m

Net Sales 20437.00 36642.10 44703.36 51855.90

Other Income 448.10 516.80 573.65 648.22

Total Income 20885.10 37158.90 45277.01 52504.12

Expenditure -16338.90 -30022.60 -37014.38 -42884.83

Operating Profit 4546.20 7136.30 8262.63 9619.29

Interest -111.00 -519.20 -602.27 -674.54

Gross profit 4435.20 6617.10 7660.35 8944.75

Depreciation -236.00 -499.20 -589.06 -671.52

Exceptional Items 0.00 411.40 469.00 478.38

Profit Before Tax 4199.20 6529.30 7540.29 8751.60

Tax -803.30 -1382.20 -1598.54 -1846.59

Profit After Tax 3395.90 5147.10 5941.75 6905.01

Extraordinary Items 0.00 0.00 0.00 0.00

Net profit 3395.90 5147.10 5941.75 6905.01

Equity capital 308.20 323.60 323.60 323.60

Reserves 9238.70 17472.90 23414.65 30319.66

Face value 1.00 1.00 1.00 1.00

EPS 11.02 15.91 18.36 21.34

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Quarterly Ended Profit & Loss Account (Consolidated)

Value(Rs.in.mn) 31-Dec-10 31-Mar-11 30-Jun-11 30-Sep-11E

Description 3m 3m 3m 3m

Net sales 9858.00 10068.60 10030.30 11334.24

Other income 8.80 286.70 185.60 176.32

Total Income 9866.80 10355.30 10215.90 11510.56

Expenditure -8125.90 -8217.50 -8550.40 -9396.08

Operating profit 1740.90 2137.80 1665.50 2114.47

Interest -135.10 -191.50 -192.10 -201.08

Gross profit 1605.80 1946.30 1473.40 1913.40

Depreciation -132.90 -132.70 -159.10 -167.06

Exceptional Items 0.20 0.00 1751.70 0.00

Profit Before Tax 1473.10 1813.60 3066.00 1746.34

Tax -284.90 -396.80 -673.10 -380.70

Profit After Tax 1188.20 1416.80 2392.90 1365.64

Extraordinary Items 0.00 0.00 0.00 0.00

Net profit 1188.20 1416.80 2392.90 1365.64

Equity capital 323.60 323.60 323.60 323.60

Face value 1.00 1.00 1.00 1.00

EPS 3.67 4.38 7.39 4.22

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Key Ratios

Particulars FY10 FY11E FY12E FY13E

No. of Shares(In Million) 308.2 323.6 323.6 323.6

EBITDA Margin (%) 22.24% 19.48% 18.48% 18.55%

PBT Margin (%) 20.55% 17.82% 16.87% 16.88%

PAT Margin (%) 16.62% 14.05% 13.29% 13.32%

P/E Ratio (x) 34.91 24.19 20.95 18.03

ROE (%) 35.57% 28.92% 25.03% 22.53%

ROCE (%) 48.23% 20.17% 21.18% 20.98%

Debt Equity Ratio 0.04 1.13 0.76 0.60

EV/EBITDA (x) 26.08 17.44 15.07 12.94

Book Value (Rs.) 30.98 55.00 73.36 94.69

P/BV 12.42 7.00 5.24 4.06

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Charts:

10

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Outlook and Conclusion

At the current market price of Rs.420.15, the stock is trading at 20.95 x FY12E

and 18.03 x FY13E respectively.

Earning per share (EPS) of the company for the earnings for FY12E and FY13E

is seen at Rs.18.36 and Rs.21.34 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 36% and

27% over 2010 to 2013E respectively.

On the basis of EV/EBITDA, the stock trades at 15.07 x for FY12E and 12.94 x

for FY13E.

Price to Book Value of the stock is expected to be at 5.24 x and 4.06 x

respectively for FY12E and FY13E.

We expect that the company will keep its growth story in the coming quarters

also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.475.00 for Long term investment.

Industry Overview

Fast Moving Consumer Goods (FMCG) goods are popularly named as consumer

packaged goods. Items in this category include all consumables (other than

groceries/pulses) people buy at regular intervals. The most common in the list are

toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish,

packaged foodstuff, household accessories and extends to certain electronic goods.

These items are meant for daily of frequent consumption and have a high return.

A major portion of the monthly budget of each household is reserved for FMCG

products. The volume of money circulated in the economy against FMCG products is

very high, as the number of products the consumer use is very high. Competition in

the FMCG sector is very high resulting in high pressure on margins

FMCG companies maintain intense distribution network. Companies spend a large

portion of their budget on maintaining distribution networks. New entrants who wish

to bring their products in the national level need to invest huge sums of money on

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promoting brands. Manufacturing can be outsourced. A recent phenomenon in the

sector was entry of multinationals and cheaper imports. Also the market is more

pressurized with presence of local players in rural areas and state brands

Scope of the Sector

The Indian FMCG sector with a market size of Rs.85,000 crore is the fourth largest

sector in the economy. A well-established distribution network, intense competition

between the organized and unorganized segments characterizes the sector.

The Rs.85,000 crore FMCG market in India is growing at a fast pace despite of the

economic downtrend. The increasing disposable income and improved standard of

living in most tier II and tire III cities are spearheading the FMCG growth across the

nation. The changing profile and mind set of the consumers has shifted the thought to

“Value for Money” from “Money for Value”.

According to a FICCI-Technopak report, India's FMCG sector is poised to reach US$

43 billion by 2013 and US$ 74 billion by 2018. The report states that implementation

of the proposed goods and services tax (GST) and the opening of foreign direct

investment (FDI) are expected to fuel growth further and raise the industry's size to

US$ 47 billion by 2013 and US$ 95 billion by 2018.

According to a study by research firm The Nielson Company, the fast moving

consumer goods market (FMCG) in rural India is tipped to touch US$100 billion by

2025 on the back of "unrelenting" demand driven by rising income levels. According to

the study, rural India accounts for more than half of sales in some of the largest

FMCG categories.

At present, rural consumers spend about US$ 9 billion per annum on FMCG items

and product categories such as instant noodles, deodorant and fabric, with the pace of

consumption growing much faster than urban areas, as per the findings.

“The industry will witness a spate of acquisitions & mergers in the 2010. There will be

a renewed focus on rural consumers too,” by an analyst based in Mumbai.

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The fast moving consumer goods (FMCG) sector is expected to grow 13 per cent during

FY 2010-11 on the back of strong economic growth, a good monsoon and subsequent

rise in rural income, according to an industry body.

Over the years companies like HUL, ITC and Dabur have improved performance with

innovation and strong distribution channels. Their key categories have strengthened

their presence and outperformed peers in the FMCG sector. On the contrary, Colgate

Palmolive and Britannia Industries are strong in single product category i.e. tooth

pastes and Biscuits. In addition companies have been successful in reviving their

presence in the semi-urban and rural markets.

Major investments

Some of the major investments in the industry are:

• Chennai-based FMCG company CavinKare is planning to invest around US$

109.50 million over the next two years in various expansion plans, including a

greenfield facility for namkeen at Thane, cool drinks in the North and others.

• Nestle, the fast moving consumer goods major, plans to invest US$ 50.49

million to set up its first research and development (R&D) centre in India at

Manesar in adjoining Gurgaon district. The facility will be made operational by

July 2012.

• Packaged consumer goods company GlaxoSmithKline Consumer Healthcare

(GSKCH) plans to invest over US$ 64.87 million on repositioning milk food

drink Horlicks as the company’s umbrella brand.

• FieldFresh Foods , joint venture of the Bharti Enterprises and Del Monte Pacific

Ltd, has inaugurated their Research and Development and manufacturing

facility in Hosur, Tamil Nadu at an investment of US$ 25.93 million.

• Agri solutions provider Buhler India plans to invest US$ 22.55 million in an

integrated manufacturing unit and other expansion projects in the next four

years, in line with its plans to achieve US$ 225.49 million turnover by 2014.

• Soft drinks and snacks major Pepsico is planning to invest US$ 500 million in

India in the next two years.

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• Atlanta-based Coca Cola Company plans to invest up to US$ 120.75 million to

set up a new bottling plant in Karnataka, India

________________ ____ _________________________ Disclaimer:

This document prepared by our research analysts 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 do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

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. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

15

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