Key context for Indonesia company: 1) Indonesia is a essential international market place for GCPL, with FY21 sales/EBITDA contribution of 16%/20%, respectively. 2) Business has higher EBITDA margins (c28%) and major positions in its essential categories — household insecticides (Hit), air fresheners (Stella), child wipes (Mitu), and hygiene (Saniter). 3) Its 5-year sales CAGR of 3.8% has been underwhelming and volatile due to poor macro and competitive challenges, which resurface from time to time in its core categories. 4) GCPL has completed exceptionally effectively with newly launched hygiene brand Saniter in response to Covid-19 brand currently tends to make up 10% of its revenues.
Key points from management get in touch with on Indonesia company: 1) Macro atmosphere remains difficult and gradual choose-up in demand is anticipated. 2) GCPL is aiming for a rebound to sustainable double-digit development in the medium term. However, offered the input value stress, it aims to sustain EBITDA margin in FY22 via judicious value increases and price efficiencies. 3) Its newly launched Saniter brand is now 10% of its Indonesia sales, and GCPL, on the back of new categories below this hygiene brand, hopes to sustain the development momentum even as Covid-19 led demand wanes. 4) Under home insecticides, GCPL sees possibilities to expand via premiumisation, conversion from coil market place and developing non-mosquito portfolio. 5) Although child wipes face value wars, GCPL is responding to defend its market place share. 6) A adjust in its hair care tactic to focus on domestic rivals as opposed to international ones has began to bear fruit and the category is anticipated to develop strongly in FY22. 7) The ecommerce channel has grown exceptionally effectively.
Overall, GCPL is preparing for a double-digit sustainable income development agenda.
We remain ‘hold’ with new target value of Rs 942: GCPL stock has run up quickly post the announcement of the new CEO (to join in October) as the market place swiftly priced in the development impetus new leadership could bring in. Our evaluation suggests that the development expectation constructed into the stock value is rather considerable (14-15% CAGR for the next 15 years). This in our view limits upside. Sustained development rebound, margin expansion in Africa and income development revival in Indonesia could nevertheless be possible stock catalysts.
Retain ‘hold’, with new TP of Rs 942 (from Rs 910): We have revised our extended-term development estimates, and roll forward our valuation base, which leads to a new TP of Rs 942.