Result Update 4QFY2013 | FMCG

May 9, 2013

Godrej Consumer Products

Performance Highlights
Quarterly result (Consolidated)
Y/E March (` cr) Revenue EBITDA OPM (%) Recurring PAT 4QFY13 1,716 275 16.0 205 4QFY12 1,323 248 18.8 168 % yoy 29.7 10.9 (271) 22.4 3QFY13 1,691 281 16.6 172 % qoq 1.4 (1.9) (55) 19.2

NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code FMCG 28,628 1,378 0.4 936/465 21,865 1 19,939 6,050 GOCP.BO GCPL@IN

`841 -

Source: Company, Angel Research

Godrej Consumer Products Ltd (GCPL), in its 4QFY2013 results, reported an impressive top-line growth of 29.7% yoy to `1,716cr. However, the OPM disappointed, declined by 271bp yoy impacted by higher advertisement and promotion (A&P) expenditure and lower margins in African operations. Key highlights of the quarter: On the domestic front Home care, Soaps and Hair Care segments posted a top-line growth of 26% yoy, 17% yoy and 27% yoy respectively. The company continued to gain market share and enjoy leadership across all formats of electrics, coils and aerosols. Indonesian and African businesses posted a top-line growth of 35% and 38% yoy, respectively. The OPM fell by 271bp yoy to 16.0%, due to the steep 48% yoy increase in A&P expenses. A&P expenses as a percentage of sales went up by 120bp on a yoy basis. The fall in OPM was also to an extent due to the steep 1,290bp decline in the margins of African business on a high base. Closure of business in Kenya due to elections (OPM impact of 500bp) and liquidation of stocks at discounted prices in Kinkys hair extension business (OPM impact of 200bp) resulted in a fall in margins of the African business. Recurring profit rose by 22.4% yoy to `205cr, aided by higher sales. The company also had exceptional income of `128cr during the quarter pertaining to divestment of non-core foods business and associated brands by its overseas subsidiary. Outlook and valuation: At the current market price, the stock is trading at 28.3x FY2015E consolidated earnings. After valuing the companys various international subsidiaries and giving effect to their varied geographic presence, we believe the current implied valuation of the domestic business is at fair levels. We maintain our Neutral rating on the stock.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 63.5 1.2 28.2 7.1

Abs. (%) Sensex GCPL

3m 2.3 16.4

1yr 21.0 55.5

3yr 18.9 177.1

Key Financials (consolidated)

Y/E March (` cr) Net Sales % chg Net Profit (Adj.) % chg EBITDA margin (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2012 4,851 33.2 550 14.2 17.8 16.2 52.0 10.2 33.2 18.8 6.2 34.6

FY2013 6,391 31.7 700 27.3 15.6 20.6 40.9 8.6 27.6 17.5 4.7 30.1

FY2014E 7,801 22.1 855 22.2 16.2 25.1 33.5 7.2 24.8 19.3 3.8 23.6

FY2015E 9,017 15.6 1,010 18.1 15.9 29.7 28.3 6.0 24.2 19.9 3.2 20.4

V Srinivasan
022-39357800 Ext: 6831 v.srinivasan@angelbroking.com

Please refer to important disclosures at the end of this report

GCPL | 4QFY2013 Result Update

Exhibit 1: Quarterly performance (Consolidated)

Y/E March (` cr) Net Sales Consumption of RM (% of Sales) Staff Costs (% of Sales) Advertising (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM Interest Depreciation Other Income Forex loss/ (gain) PBT (excl. Ext Items) Ext Income/(Expense) PBT (incl. Ext Items) (% of Sales) Provision for Taxation (% of PBT) PAT (reported) bef MI PATM Minority Interest Reported PAT Equity shares (cr) FDEPS (`)
Source: Company, Angel Research

4QFY13 1,716 770 44.9 171 10.0 163 9.5 337 19.6 1,440 275 16.0 22 16 28 5 260 129 389 22.7 53 13.6 336 19.6 2 334 34 9.8

4QFY12 1,323 614 46.4 120 9.1 110 8.3 231 17.4 1,075 248 18.8 19 16 20 233 25 258 19.5 60 23.3 198 14.9 5 193 34 5.7

% yoy 29.7 25.3 42.5 48.3 45.9 34.0 10.9 14.6 3.2 43.7 11.8 51.0

3QFY13 1,691 752 44.5 157 9.3 181 10.7 321 19.0 1,411 281 16.6 19 20 19 3 257 257 15.2 67 26

% qoq 1.4 2.4 8.9 (10.2) 5.1 2.1 (1.9) 17.7 (21.7) 48.9 78.6 1.1 51.2

FY2013 6,391 2,951 46.2 591 9.2 652 10.2 1,199 18.8 5,392 999 15.6 77 77 84 33 896 (129) 1,025 16.0 179 17

FY2012 4,851 2,316 47.7 401 8.3 450 9.3 823 17.0 3,990 861 17.7 66 64 67 21 777 (200) 977 20.1 226 23 751 15.5 25 726 32 22.4

% chg 31.7 27.4 47.1 44.9 45.6 35.1 16.0

19.5 25.6 58.0 15.3 4.9 (20.7) 12.6

70.0

190 11.2 18

76.8

845 13.2 49

73.4 73.4

172 34 5.1

94.0 94.0

796 34 23.4

9.6 4.2

Exhibit 2: Actual vs Angel estimates

(` cr) Revenue EBITDA OPM (%) Recurring PAT
Source: Company, Angel Research

Actual 1,716 275 16.0 205

Angel est. 1,711 324 18.9 213

% chg 0.3 (15.0) (289) (3.8)

May 9, 2013

GCPL | 4QFY2013 Result Update

Top-line growth steady at 29.7%

GCPL reported an impressive top-line growth of 29.7% yoy to `1,716cr. The domestic business registered a growth of 18% yoy. The international business registered an organic growth of 23% yoy. Exhibit 3: Robust top-line performance
2,000 1,800 1,600 1,400 (` cr) 1,200 1,000 800 600 1,011 200 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 998 400 39.6 24.5 1,186 1,344 1,323 1,389 1,595 1,691 1,716 35.9 30.9 60.0 40.0 20.0 98.6 39.2 34.5 25.8 29.7 120.0 100.0 80.0 ( %)

Top-line (LHS) Source: Company, Angel Research

yoy growth (RHS)

Home care and Personal wash segments drive domestic growth

The domestic business registered a growth of 18% yoy. The companys homecare (household insecticides) category on a gross basis grew by 26% yoy (2.1x category growth) in 4QFY2013. It continued to gain market share and enjoy leadership across all formats of electrics, coils and aerosols. Initial response to the recently launched HIT anti-roach gel has been very positive. The highly penetrated personal wash (soaps) segment grew by 17% yoy, on a gross basis with the underlying volume growth coming in at 4% vs category growth of 1%. The Hair care business posted a growth of 27% (2x of the category growth) aided by positive response for Godrej expert rich crme hair colour.

International business posts strong top-line growth

GCPLs international business registered a growth of 49%, aided by an impressive performance in all the regions where the company has presence such as Indonesia, Africa, Latin America and Europe. On an organic basis, the international business posted a growth of 23%. The Indonesian business grew by 35% yoy (35% yoy in constant currency terms) and sales came in at `343cr. Sales growth in Indonesia was led by continuous marketing investments, new product launches and distribution expansion. The Africa business posted a top-line growth of 38% yoy to `178cr. The LatAm business witnessed a strong sales growth of 72% to `141cr aided by the consolidation of Chile based Cosmetica Nacional and new product launches.

May 9, 2013

GCPL | 4QFY2013 Result Update

Exhibit 4: International business

Region Net Sales LATAM Asia Afica Europe OPM LATAM Asia Africa Europe
Source: Company, Angel Research

4QFY2013 141 343 178 99 761 9.0 19.0 7.0 13.0

4QFY2012 82 254 129 47 507 13.3 21 19.9 10.7

(yoy %) 72 35 38 109 50.1 (yoy bp) (430) (200) (1290) 230

Bottom-line up 22.4% yoy

Despite the disappointment on the OPM front, GCPL posted a 22.4% yoy growth in recurring net profit aided by a lower tax rate. The OPM fell by 271bp yoy to 16.0%, due to a steep 48% yoy increase in A&P expenses. A&P expenses as a percentage of sales went up by 119bp on a yoy basis. The fall in OPM was also to an extent due to the steep 1,290bp decline in the margins of the African business on a high base. Closure of business in Kenya due to elections (OPM impact of 500bp) and liquidation of stocks at discounted prices in Kinkys hair extension business (OPM impact of 200bp) resulted in the fall in margins of the African business.

Exhibit 5: Recurring PAT performance

260 210 160 110 60 10 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 54.4 10.8 18.3 142 100 144 167 168 130 159 172 205 39.1 24.8 3.1 22.4 94.2 30.3 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 ( %)

(` cr)

PAT (LHS) Source: Company, Angel Research

yoy growth (RHS)

May 9, 2013

GCPL | 4QFY2013 Result Update

Exhibit 6: Gross margin and OPM

60.0 50.0 40.0 30.0 20.0 10.0 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 17.0 14.3 17.4 51.1 51.0 51.6 53.5 53.6 52.2 51.9 55.5 55.1

Exhibit 7: Ad spends/sales rise y-o-y

190 170 150 130 (` cr) 110 90 70 117 111 112 110 153 50 30 10 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 75 155 181 163 7.4 11.7 9.4 8.3 8.3 14.0 11.0 9.7 10.7 9.5 12.0 10.0 (%) 8.0 6.0 4.0 2.0 -

(%)

19.7

18.8

14.3

15.3

16.6

16.0

OPM

Gross Margin

Absolute ASP (LHS)

ASP as % of sales (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

Investment rationale
Acquisitions to drive future growth: GCPLs recent acquisitions have been in
line with its 3X3 strategy and are expected to enable the company to spread its footprint and grow inorganically. GCPLs Indonesian subsidiary Megasari (acquired in April 2010) has consistently posted a healthy financial performance. The acquisition of Darling Group, the market leader in hair extension products in the African continent, and Chile based Cosmetica Nacional will continue to drive strong growth for the company in Africa and LatAm. The integration of Darling group is proceeding smoothly and the second phase of consolidation took place in 3QFY2013. The Management has constantly reiterated that all recent international acquisitions have been EPS-accretive.

Synergistic benefits due to integration of GHPL businesses: We believe there

are significant synergistic benefits in terms of distribution and supply-chain networks through the integration of Godrej Household Products Ltd (GHPL), which are likely to get reflected in GCPLs performance going ahead. Moreover, GHPLs strong presence in Southern India complements GCPLs strong presence in Northern India extremely well, giving GCPL a balanced presence.

Outlook and valuation

At the current market price, the stock is trading at 28.3x FY2015E consolidated earnings. After valuing the companys various international subsidiaries and giving effect to their varied geographic presence, we believe the current implied valuation of the domestic business is at fair levels. We maintain our Neutral rating on the stock.

May 9, 2013

GCPL | 4QFY2013 Result Update

Exhibit 8: Peer valuation

Company Asian Paints Britannia Colgate Dabur India Godrej Con GSK Con* HUL ITC Marico Nestle* TGBL Reco. Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Mcap (` cr) 44,829 6,901 20,747 27,524 28,626 16,403 126,474 269,305 13,607 47,277 9,128 CMP (`) 4,674 578 1,526 158 841 3,900 585 344 211 4,903 148 TP (`) Upside (%) P/E (x) FY14E 32.5 28.5 34.1 29.4 33.5 32.3 34.2 31.1 26.7 37.3 18.7 FY15E 27.5 23.0 29.4 25.1 28.3 26.6 31.8 26.5 21.6 30.7 17.0 EV/Sales (x) FY14E 3.2 1.0 5.6 3.8 3.8 4.1 4.2 7.6 2.5 4.7 1.0 FY15E 2.6 0.8 4.7 3.1 3.1 3.3 3.6 6.2 2.0 4.0 0.5 RoE (%) FY14E 35.0 37.4 98.3 41.5 24.8 33.7 113.4 35.5 22.8 58.8 9.5 FY15E 32.7 37.3 88.0 40.1 24.2 33.4 87.0 34.1 22.9 69.5 9.8 CAGR # Sales 18.8 15.5 15.1 16.5 18.8 17.6 14.7 15.3 14.8 16.7 10.0 PAT 18.0 22.0 17.4 19.5 18.9 18.7 11.7 16.6 23.3 18.4 13.0

Source: Company, Angel Research; Note: #Denotes CAGR for FY2013-15E;*December year ending

Exhibit 9: One-year forward P/E chart

50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 May-08 May-09 May-10 May-11 May-12 May-13 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Feb-09 Feb-10 Feb-11 Feb-12 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Feb-13

Source: Company, Angel Research, Note: Blue line indicates 5-year average

May 9, 2013

(x)

GCPL | 4QFY2013 Result Update

Company background
GCPL is a leading FMCG company in the household and personal care products category, with brands such as Good Knight, HIT, Cinthol, Godrej No.1 and Expert. The company has built a foothold in Africa, Latin America, Indonesia and UK through several acquisitions. Currently, ~40% of the company's revenue comes from its international business.

Profit & loss statement (consolidated)

Y/E March (` cr) Total operating income % chg Total expenditure Cost of Materials Advertising Exp Personnel Others EBITDA % chg (% of Net Sales) Depreciation & amort EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Share in profit of asso. Recurring PBT % chg Prior Period & Extra Exp/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earn. of asso. Less: Minority interest (MI) PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY10 2,044 46.3 1,634 946 133 152 403 407 96.6 20.0 24 384 104.2 18.8 11 45 10.7 420 100.7 420 80 19.1 340 340 340 96.7 16.6 11.0 10.0 96.7 FY11 3,646 78.4 3,002 1,749 352 285 617 641 57.3 17.6 50 591 54.0 16.2 52 70 11.4 612 45.7 (33) 645 130 21.3 515 515 482 41.8 13.2 14.9 14.2 41.8 FY12 4,866 33.5 3,987 2,316 450 392 830 864 34.8 17.8 64 799 35.3 16.5 66 52 6.5 801 30.9 (180) 980 226 28.2 754 24.5 730 550 14.2 11.3 16.2 16.2 14.2 FY13 6,407 31.7 5,392 2,951 652 591 1,199 999 15.6 15.6 77 922 15.3 14.4 77 68 7.3 928 16.0 (96) 1,025 179 19.3 845 49.3 796 700 27.3 11.0 20.6 20.6 27.3 FY14E 7,817 22.0 6,541 3,627 780 718 1,416 1,260 26.2 16.2 99 1,161 26.0 14.9 66 71 6.0 1,183 27.4 1,183 278 23.5 905 49.3 855 855 22.2 11.0 25.1 25.1 22.2 FY15E 9,033 15.6 7,587 4,220 902 830 1,636 1,429 13.4 15.9 114 1,315 13.3 14.6 59 113 8.1 1,385 17.1 1,385 325 23.5 1,059 49.3 1,010 1,010 18.1 11.2 29.7 29.7 18.1

May 9, 2013

GCPL | 4QFY2013 Result Update

Balance Sheet (consolidated)

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Long term Provisions Other long term liabilities Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Long term loans and adv. Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 910 305 225 380 553 357 998 359 153 206 1 368 67 660 377 282 8 2,795 167 1,237 227 187 823 736 501 3,754 728 494 234 38 3,458 246 2,041 640 145 1,256 1,208 833 4,809 940 571 369 47 4,221 246 2,798 869 153 1,776 1,897 901 5,785 1,200 670 530 60 4,371 246 3,191 1,004 148 2,038 2,108 1,083 6,290 1,387 784 603 69 4,521 246 3,827 1,323 148 2,356 2,316 1,511 6,950 998 31 924 955 37 7 32 1,693 1,725 2,001 1 18 9 3,754 34 2,781 2,815 88.00 1,877 (1) 22 7 4,809 34 3,279 3,313 209.51 2,247 (14) 22 7 5,785 34 3,935 3,969 258.84 2,047 (14) 22 7 6,290 34 4,746 4,780 308.17 1,847 (14) 22 7 6,950 FY10 FY11 FY12 FY13E FY14E FY15E

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GCPL | 4QFY2013 Result Update

Cash flow Statement

Y/E March (` cr) Profit before tax Depreciation Change in Working Capital Interest / Dividend (Net) Direct taxes paid Others Cash Flow from Operations (Inc.)/ Dec. in Fixed Assets (Inc.)/ Dec. in Investments Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Interest / Dividend (Net) Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY10 420 24 (13) (16) 80 (24) 310 34 (67) (33) 5 (241) 104 (16) (324) (47) 352 305 FY11 612 50 (389) 25 130 173 342 (2,736) 67 (2,669) 498 1,973 197 25 2,249 (78) 305 227 FY12 801 64 (11) 18 226 197 842 (760) (760) 657 (126) 182 18 331 413 227 640 FY13E 928 77 167 23 179 50 1,066 (985) (985) 370 199 23 148 229 640 869 FY14E 1,183 99 (49) 8 278 4 966 (423) (423) (200) 199 8 (407) 136 869 1,004 FY15E 1,385 114 (119) (40) 325 9 1,024 (346) (346) (200) 199 (40) (359) 319 1,004 1,323

May 9, 2013

GCPL | 4QFY2013 Result Update

Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) 5.7 47 21 95 9 5.5 44 38 72 42 6.7 59 36 87 30 6.5 59 37 105 15 6.5 59 37 95 14 6.5 59 37 91 17 41.5 166.7 44.5 25.0 121.5 38.4 18.8 113.9 33.2 17.5 135.3 27.6 19.3 148.3 24.8 19.9 133.0 24.2 11.0 10.0 11.8 4.1 31.0 14.9 14.2 16.4 5.0 53.3 16.2 16.2 18.8 4.6 82.7 20.6 20.6 24.3 5.0 97.4 25.1 25.1 29.5 5.0 116.6 29.7 29.7 34.5 5.0 140.5 84.3 71.4 27.2 0.5 13.9 69.6 28.4 59.4 51.2 15.8 0.6 8.3 47.5 8.1 52.0 44.8 10.2 0.5 6.2 34.6 6.2 40.9 34.6 8.6 0.6 4.7 30.1 5.2 33.5 28.5 7.2 0.6 3.8 23.6 4.7 28.3 24.4 6.0 0.6 3.2 20.4 4.2 FY10 FY11 FY12 FY13E FY14E FY15E

May 9, 2013

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GCPL | 4QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies 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. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

GCPL No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

May 9, 2013

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