Gross margin pressure accentuated but Ebitda margins marginally expanded, led by operating leverage, lower A&P - international fared much better.
Key takeaway: GCPL reported a strong growth in revenues which was broad-based across categories & markets (ex-Indonesia). Gross margin pressure accentuated but Ebitda margins marginally expanded, led by operating leverage, lower A&P – international fared much better. 2Y CAGR also appear impressive, across heads. Focus on innovations continue and calibrated price hikes are underway, which should support margins. We raise EPS forecasts by 4-6% and retain ‘buy’ with Rs 1,150 PT.
Ebitda above-estimate: GCPL’s 1QFY22 Ebitda grew 27% YoY to `5.8 billion, which was sharply above our estimates although largely in line with consensus’. Revenue growth at 24% YoY (2Y cagr: 11%) was in line. Pre-ex earnings growth was even better at 38% YoY to Rs 4.2 billion, aided by lower interest costs and higher other income. While GCPL benefited from a low base, 2Y Ebitda CAGR was also strong at 15%.
Double-digit two-year CAGR in India: India revenue growth was strong, up 19% YoY with two-yeat CAGR in double digits (11%). Volume growth was slightly lower at 15% YoY and 9% on two-year CAGR, while the rest was led by price hikes, especially in soaps. GCPL stopped disclosing separate revenue for HI, soaps and hair colour and has reclassified it into two segments – Home Care and Personal Care. Home Care grew 21% YoY and 17% on a two-year CAGR led by strong double-digit growth in household insecticides despite a high base. Personal Care grew 17% YoY albeit 2-yr cagr was lower at 9%.