GODFREY PHILLIPS INDIA LTD Q1 FY14 Detail...
Transcript of GODFREY PHILLIPS INDIA LTD Q1 FY14 Detail...
CMP 2699.00
Target Price 2888.00
ISIN: INE260B01010
SEPTEMBER 19th
2013
GODFREY PHILLIPS INDIA LTD.
Result Update: Q1 FY14
HOLDHOLDHOLDHOLD
Index Details
Stock Data
Sector Tobacco Products
BSE Code 500163
Face Value 10.00
52wk. High / Low (Rs.) 3598.95/2250.00
Volume (2wk. Avg. Q ) 257
Market Cap (Rs. in mn.) 28069.60
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY13A FY14E FY15E
Net Sales 20964.80 23270.93 25458.40
EBITDA 3518.20 3754.37 4156.86
Net Profit 1694.80 1801.68 1948.58
EPS 162.96 173.24 187.36
P/E 16.56 15.58 14.41
Shareholding Pattern (%)
1 Year Comparative Graph
GODFREY PHILLIPS INDIA LTD BSE SENSEX
SYNOPSIS
Godfrey Phillips India is one of the largest
players in the Indian cigarette industry with
an annual turnover of over Rs. 36000 million
(estimated 2012-13) has other business
interest in tea pan masala and confectionary.
During the quarter, the company’s net sales
registered 27.10% increase and stood at a
record Rs. 6149.70 million from Rs. 4838.30
million over the corresponding quarter last
year.
The company’s operations primarily span the
entire northern and western part of the
country with new markets like West Bengal
and South of India.
Tea exports have grew in volume itself to 2339
tonnes over last year’s 1508 tonnes and value
to Rs.392.70 mn against Rs.183.60 mn in
previous year.
Company’s foray into retail business through
24X7 convenience stores is making steady
progress operating through 35 stores spread
across NCR and expects to more than double
this number during the current year.
Net Sales and PAT of the company are
expected to grow at a CAGR of 10% and 2%
over 2012 to 2015E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Godfrey Phillips India Ltd. 2699.00 28069.60 162.96 16.56 2.65 400.00
ITC Ltd. 355.70 2808743.90 9.74 36.43 14.95 450.00
VST Industries Ltd. 1505.00 23240.10 79.56 18.92 7.64 650.00
NTC Industries Ltd. 15.36 165.10 1.60 9.60 0.56 0.00
QUARTERLY HIGHLIGHTS (STANDALONE)
Results updates- Q1 FY14,
Godfrey Phillips India Ltd manufactures some of the most popular cigarette brands in the country like FS1, Four
Square, Red and White, Cavanders, Tipper and North Pole and also manufactures and distributes iconic brand
Marlboro under a license agreement with Philip Morris. A robust supply-chain & distribution network ensures
the popular brands reach with comprises of 520 exclusive distributors and over 800,000 retail outlets and has
reported its financial results for the quarter ended 30 JUNE, 2013.
The company has achieved a turnover of Rs. 6149.70
million for the 1st quarter of the current year 2013-14 as
against Rs. 4838.30 millions in the corresponding quarter
of the previous year. The company has reported an
EBITDA of Rs. 556.40 millions and a net profit of
Rs.233.50 million against Rs. 280.30 million reported
respectively in the corresponding quarter of the previous
year. The company has reported an EPS of Rs. 22.45 for the 1st quarter as against an EPS of Rs. 26.95 in the
corresponding quarter of the previous year.
Break up of Expenditure
During the quarter Total expenditure rose by 26 per cent, mainly increase in Purchase of Traded goods along,
other expenses with consideration of depreciation. Total expenditure in Q1 FY14 stood to Rs. 5585.10 million as
against Rs. 4419.60 million in Q1 FY13.
Employees’ benefits expenses incurred Rs.591.80 in Q1 FY14 against Rs.485.10 millions and Other Expenses
faced at Rs.1373.00 million against Rs. 1231.30 million in the corresponding period of the previous year.
Whereas Depreciation & Amortization is at Rs. 216.50 million in Q1 FY14 and Purchase of Traded goods at
Rs.1290.90 million against Rs.733.80 million in the corresponding period of the previous year are the primarily
attributable to growth of expenditure.
Months JUNE-13 JUNE-12 % Change
Net Sales 6149.70 4838.30 27.10%
PAT 233.50 280.30 (16.70%)
EPS 22.45 26.95 (16.70%)
EBITDA 556.40 1127.00 (50.63%)
Segment Revenue
Latest Updates
• Tea exports have registered substantial growth over the previous year. Business expansion with additional
clients and entry to new geographies, exports catapulted itself to more than double in terms of value. While
in terms of volume, the business grew itself to 2339 tonnes over last year’s 1508 tonnes.
• Company continues to enjoy the highest rating of ‘CRISIL A1+’ for Short Term Debt Programme, ‘CRISIL
AA+/Stable’ for Long Term Loan, ‘CRISIL AA+/Stable’ for Cash Credit Limit and ‘CRISIL A1+’ for Non-fund
based Limit.
COMPANY PROFILE
Godfrey Phillips India Ltd manufactures some of the most popular cigarette brands in the country like FS1, Four
Square, Red and White, Cavanders, Tipper and North Pole. Additionally, Godfrey Phillips India also manufactures
and distributes iconic brand Marlboro under a license agreement with Philip Morris. The Company cigarettes are
manufactured in state-of-the-art factories at Guldhar, Andheri & Rabale. A robust supply-chain & distribution
network ensures that the popular brands reach the length & breadth of the country. The wide network comprises
of 520 exclusive distributors and over 800,000 retail outlets.
Godfrey Phillips India concerted efforts in Tea City has led to successful Symphony and Super Cup launch. The
Company has forayed into the highly competitive confectionary segment with Fundamint and FundaGoli using
their extensive distribution launch to have a pan India reach. Godfrey Phillips India has also recently launched
Pan Vilas pan masala which has already shown great potential with positive outcomes.
The company undertakes a considerable number of Six Sigma Projects in order to inculcate quantum
improvements year after year. Manufacturing facilities at Ghaziabad, U.P; Mumbai, Maharashtra and Rabale, Navi
Mumbai, Maharashtra are recognized not only for their superior production capabilities, but also for the
adoption of environment friendly processes.
� Diverse Business
• Cigarette
Godfrey Phillips India is one of the largest players in the Indian cigarette industry and has two major
stakeholders, the K. K. Modi Group and Philip Morris. The company’s operations primarily span the entire
northern and western part of the country with new markets like West Bengal and South of India. The
Company cigarettes are manufactured in state-of-the-art factories at Guldhar, Andheri & Rabale. A robust
supply-chain & distribution network ensures that the popular brands reach the length & breadth of the
country. The wide network comprises of 520 exclusive distributors and over 800,000 retail outlets.
Brands
� FS1
� Four Square
� Red & White
� North Pole
� Cavanders
� Tipper
• Cigars
Brands
� Cohiba
� Montecristo
� Romeo y Julieta
� Partagas
� Guantanamera
� Davidoff
� Phillies
� Hav-A-Tampa
� Don Diego
� Santa Damiana
� Flor de Copan
� Henri Wintermans
• Pan vilas
Pan Vilas is manufactured at Baramati, a state-of-the-art plant that employs some of the world’s most
advanced food processing technologies. The brand goes a step further to ensure quality and establish trust by
using a natural alternate to banned Magnesium Carbonate and applying the best worldwide technology in
manufacturing.
• Tea
� Symphony Assam Tea
� Symphony Green Tea
� Symphony Darjeeling Tea
� Samovar
� Utsav
� Super Cup
� Super Cup Duet
� Rangoli
� Madhuban Festive Pack
• Funda Goli
Godfrey Phillips India first ventured into the highly competitive confectionery segment in 2008 with the
launch of our mouth freshener- Funda Mint. The launch of the Funda Goli range of candies in 2009 has helped
us establish a niche for ourselves as a unique confectionery brand
• Twenty Four Seven
Twenty Four Seven Convenience Stores are India’s only convenience stores operating round the clock. It’s
offer’s comprise of fresh food, groceries, vegetables, RTE (ready to eat) meals, frozen food, wide assortment
of beverages, imported products, OTC pharmaceuticals, cosmetics, personal care products, travel accessories,
pet food, toys, music, movies, magazines, cigarettes, hukkas, gifts and souvenirs.
� International Business
Godfrey Phillips India has also spread its footprint into the international markets. The International Division
collaborates with some of the top players in the international tobacco industry to assist them in marketing
their products and providing various professional and expert services including contract manufacturing, cut
tobacco, smoke analysis and various other consultancy services. Many countries from the Middle East to
West Africa, South East Africa, South East Asia, East Europe, Australia, South America and Central America
have been added to the portfolio. The International Division also exports Bulk and Specialty Teas to Germany,
USA, Japan, UAE, Kazakhstan and Iran.
FINANCIAL HIGHLIGHT (STANDALONE) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance Sheet as at March31, 2012 -2015E
EQUITY AND LIABILITIES: FY12 FY13 FY14E FY15E
Shareholders’ Funds:
Share Capital 104.00 104.00 104.00 104.00
Reserves and Surplus 9105.10 10313.23 12271.88 14220.46
a) Net worth 9209.1 10417.23 12375.88 14324.46
Non-Current Liabilities:
long-term borrowings 2318.85 1661.30 1827.43 1918.80
Deferred Tax Liabilities [Net] 0.00 38.40 40.32 42.34
Other Long Term Liabilities 1.91 2.00 2.06 2.13
Long Term Provisions 298.20 358.20 411.93 461.36
b) Long term liabilities 2618.96 2059.9 2281.74 2424.63
Current Liabilities:
Short-term borrowings 343.67 592.54 799.93 919.92
Trade Payables 1189.36 1574.72 1810.93 1992.02
Other Current Liabilities 2381.41 2610.32 2871.35 3014.92
Short Term Provisions 626.84 629.90 642.50 648.92
c) Current Liabilities 4541.28 5407.48 6124.71 6575.78
Total (a+b+c) 16369.34 17884.61 20782.33 23324.87
ASSETS:
Non-Current Assets:
Tangible Assets 5247.70 6932.09 8692.84 10228.78
Intangible Assets 23.19 59.08 53.17 50.51
Capital work-in-progress 1374.09 152.71 134.38 126.32
Deferred tax assets 75.22 0.00 0.00 0.00
Non Current Investments 1605.48 1615.01 1647.31 1663.78
Long Term Loans and Advances 422.72 419.90 424.10 432.58
d) Non-Current Assets 8748.4 9178.79 10951.81 12501.98
Current Assets:
Current Investments 1977.83 1570.30 1256.24 979.87
Inventories 3771.57 5383.54 6783.26 8004.25
Trade Receivables 749.50 792.97 824.69 865.92
Cash and Bank Balances 218.61 221.10 214.47 210.18
Short Term Loans and Advances 769.56 584.98 614.23 638.80
Other Current Assets 133.87 152.93 137.64 123.87
e) Current Assets 7620.94 8705.82 9830.52 10822.89
Total (d+e) 16369.34 17884.61 20782.33 23324.87
Annual Profit & Loss Statement for the period of 2012 to 2015E
Value(Rs.in.mn) FY12 FY13 FY14E FY15E
Description 12m 12m 12m 12m
Net Sales 19118.00 20964.80 23270.93 25458.40
Other Income 303.30 306.00 333.54 363.56
Total Income 19421.30 21270.80 23604.47 25821.95
Expenditure -15906.20 -17752.60 -19850.10 -21665.09
Operating Profit 3515.10 3518.20 3754.37 4156.86
Interest -316.50 -269.20 -296.12 -319.81
Gross profit 3198.60 3249.00 3458.25 3837.05
Depreciation -626.30 -880.00 -1056.00 -1203.84
Profit Before Tax 2572.30 2369.00 2402.25 2633.21
Tax -758.70 -674.20 -600.56 -684.63
Net Profit 1813.60 1694.80 1801.68 1948.58
Equity capital 104.00 104.00 104.00 104.00
Reserves 9105.10 10470.20 12271.88 14220.46
Face value 10.00 10.00 10.00 10.00
EPS 174.38 162.96 173.24 187.36
Quarterly Profit & Loss Statement for the period of 31 DEC, 2012 to 30 SEP, 2013E
Value(Rs.in.mn) 31-Dec-12 31-Mar-13 30-June-13 30-Sep-13E
Description 3m 3m 3m 3m
Net sales 5414.50 6057.70 6149.70 6272.69
Other income 112.30 96.90 129.10 145.88
Total Income 5526.80 6154.60 6278.80 6418.58
Expenditure -4543.00 -5031.60 -5722.40 -5806.01
Operating profit 983.80 1123.00 556.40 612.57
Interest -65.30 -60.30 -57.40 -54.53
Gross profit 918.50 1062.70 499.00 558.04
Depreciation -229.40 -243.80 -216.50 -238.15
Profit Before Tax 689.10 818.90 282.50 319.89
Tax -197.00 -221.00 -49.00 -57.58
Net Profit 492.10 597.90 233.50 262.31
Equity capital 104.00 104.00 104.00 104.00
Face value 10.00 10.00 10.00 10.00
EPS 47.32 57.49 22.45 25.22
Ratio Analysis
Particulars FY12 FY13 FY14E FY15E
EPS (Rs.) 174.38 162.96 173.24 187.36
EBITDA Margin (%) 18.39 16.78 16.13 16.33
PBT Margin (%) 13.45 11.30 10.32 10.34
PAT Margin (%) 9.49 8.08 7.74 7.65
P/E Ratio (x) 15.48 16.56 15.58 14.41
ROE (%) 19.69 16.03 14.56 13.60
ROCE (%) 34.88 34.29 32.06 31.23
Debt Equity Ratio 0.29 0.21 0.21 0.20
EV/EBITDA (x) 8.68 8.56 8.12 7.38
Book Value (Rs.) 885.49 1016.75 1189.99 1377.35
P/BV 3.05 2.65 2.27 1.96
Charts
OUTLOOK AND CONCLUSION
� At the current market price of Rs. 2699.00, the stock P/E ratio is at 15.58 x FY14E and 14.41 x FY15E
respectively.
� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.173.24 and
Rs.187.36 respectively.
� Net Sales and PAT of the company are expected to grow at a CAGR of 10% and 2% over 2012 to 2015E
respectively.
� On the basis of EV/EBITDA, the stock trades at 8.12 x for FY14E and 7.38 x for FY15E.
� Price to Book Value of the stock is expected to be at 2.27 x and 1.96 x respectively for FY14E and FY15E.
� We expect that the company surplus scenario is likely to continue for the next three years, will keep its
growth story in the coming quarters also. We recommend ‘HOLD’ in this particular scrip with a target price
of Rs.2888.00 for Medium to Long term investment.
INDUSTRY OVERVIEW
Indian cigarette market has shown a decline of around 2% in volume and a growth of 20% in terms of value over
the previous year. This year a new segment has been created – the 64 mm filter tipped cigarette segment with
relatively lower excise duty, which is considered as cost effective option and has provided some relief to the
manufacturers in terms of volume protection. Premiumisation trend continued with Kings Segment, which now
accounts 14% of the industry’s share whereas Mini Kings has been able to grow to a modest level of 4.3%.
However, the Regular Size Filter (RSFT) category, which forms the body of the industry has lost industry’s share
from 82.2% to 76.9% in FY 13. Also, the industry continues to face the menace of illicit trade.
Indian leaf tobacco exports were higher as compared to last year, both in volume and value terms
IMF forecasts real global GDP growth of 3.3% in 2013, about the same as the 3.2% in 2012, and the expectation is
that growth rates will improve to 4% the year after. Emerging markets are expected to grow in between 5% to
6% in the next 2 years.
SEGMENT WISE PERFORMANCE IN 2012-2013
Cigarettes
The domestic cigarettes business was subject to increased rates of central and state taxes during the year under
report. Although the resultant pricing pressure caused domestic volumes to decline, The Company still registered
a growth of over 5% in terms of value, from Rs. 27760.00 mn in the previous year to Rs. 29200.00 mn and also
captured a healthy market share of the newly-created 64 mm segment.
Godfrey Phillips India Ltd is working on a roadmap to strengthen key brands like, Four Square, Red & White and
Cavanders, through a combination of product innovation, distribution-led initiatives and consumer engagement
programs. New research methodologies are being used to understand consumers in a more holistic manner. It is
also embarking on a series of critical strategic projects to improve brand saliency and offer unique value
propositions to consumers which will help it place its key brands at a higher growth path.
Tea
Post the slight dip witnessed last year, the domestic tea business bounced back on track and recorded sales of Rs.
1060.00 mn as against Rs. 950.00 mn during preceding year, a growth of 12%. The Company undertook various
initiatives such as launching new product offerings for both general and institutional customers and expanding
modern trade business with entry into new chains and trade formats, which contributed to the growth story.
Apart from inroad made into the HORECA, HTS (hot tea shops) and Railways, various other alternative
distribution channels are being targeted for business expansion. Heightened print mass media campaigns and
ground activations have led to greater salience and traction for the Tea City portfolio. Post complete automation,
both the tea blending and packing units at Kolkata and Bazpur have become ISO 22000:2005 certified. Super cup
franchise rejuvenation progressed well on track with upgraded product quality and contemporary packaging
leading to a volume growth of 11% during the year. Targeted innovative campaigns and offering have helped in
stabilizing and growing other franchises like Utsav and Samovar.
Chewing Products
Your Company had another good year for its Chewing business as it achieved turnover of Rs. 1420.00 mn during
financial year 2012-13 as compared to Rs. 1210.00 mn during financial year 2011-12. This growth was achieved
in the backdrop of significant changes in the industry during the year including ban on Gutkha in most of the
States in India. This growth could have been still higher but for the surprise move by the Maharashtra
government to cover tobacco-free pan masala category also under its order to ban Gutkha invoked in July 2012.
Full implementation of the Gutkha ban is expected to result in upsides in the pan masala business. During the
year, the Company entered the market in Jharkhand. While ‘Pan Vilas’ continues to be the flagship offering, an
economy pan masala variant under the brand ‘Raag’ is in the process of being launched in the markets like: UP,
MP, Jharkhand, Orissa, and Gujarat. We are operating in zarda segment with the brands ‘Swarn Vilas’ and
‘Tarana’. We are looking to further streamline operations to drive efficiency and contain costs while
strengthening distribution reach to tap into new markets especially in rural segments and thereby improve
market share. The Company will look to enter newer segments within the chewing products category such as
flavored elaichi and supari, and mouth freshener, in both premium and mid premium categories.
Retail
Company’s foray into retail business through 24X7 convenience stores is making steady progress. The Company
is currently operating through 35 stores spread across NCR and expects to more than double this number during
the current year. New business models are currently under evaluation with the help of Japanese consultants and
we hope to scale greater heights in times to come.
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.
Firstcall India Equity Research: Email – [email protected]
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