Key context for Indonesia enterprise: 1) Indonesia is a key worldwide marketplace for GCPL, with FY21 gross sales/EBITDA contribution of 16%/20%, respectively. 2) Enterprise has excessive EBITDA margins (c28%) and main positions in its key classes — family pesticides (Hit), air fresheners (Stella), child wipes (Mitu), and hygiene (Saniter). 3) Its 5-year gross sales CAGR of three.8% has been underwhelming and risky as a result of poor macro and aggressive challenges, which resurface occasionally in its core classes. 4) GCPL has performed exceptionally nicely with newly launched hygiene model Saniter in response to Covid-19; model already makes up 10% of its revenues.
Key factors from administration name on Indonesia enterprise: 1) Macro surroundings stays difficult and gradual pick-up in demand is anticipated. 2) GCPL is aiming for a rebound to sustainable double-digit progress within the medium time period. Nevertheless, given the enter worth stress, it goals to keep up EBITDA margin in FY22 by way of considered worth will increase and value efficiencies. 3) Its newly launched Saniter model is now 10% of its Indonesia gross sales, and GCPL, on the again of latest classes underneath this hygiene model, hopes to keep up the expansion momentum at the same time as Covid-19 led demand wanes. 4) Beneath house pesticides, GCPL sees alternatives to broaden by way of premiumisation, conversion from coil market and rising non-mosquito portfolio. 5) Though child wipes face worth wars, GCPL is responding to defend its market share. 6) A change in its hair care technique to concentrate on home rivals versus worldwide ones has began to bear fruit and the class is anticipated to develop strongly in FY22. 7) The ecommerce channel has grown exceptionally nicely.
Total, GCPL is getting ready for a double-digit sustainable income progress agenda.
We keep ‘maintain’ with new goal worth of Rs 942: GCPL inventory has run up quickly publish the announcement of the brand new CEO (to hitch in October) because the market rapidly priced within the progress impetus new management might usher in. Our evaluation means that the expansion expectation constructed into the inventory worth is kind of vital (14-15% CAGR for the subsequent 15 years). This in our view limits upside. Sustained progress rebound, margin enlargement in Africa and income progress revival in Indonesia might nonetheless be potential inventory catalysts.
Retain ‘maintain’, with new TP of Rs 942 (from Rs 910): We now have revised our long-term progress estimates, and roll ahead our valuation base, which results in a brand new TP of Rs 942.