BRITANNIA INDUSTRIES LTD: THINK BETTER, BUY BETTER !!!

Scrip Code: 500825/ BRITANNIA

CMP:  Rs. 875.60; Buy at current levels.
Medium to Long term Target – Rs. 1010; STOP LOSS – Rs. 805.55; Market Cap: Rs. 10,481.00 Cr; 52 Week High/Low: Rs. 444.90 / Rs. 881.80

Total Shares: 11,97,00,815 shares; Promoters : 6,08,68,345 shares – 50.85 %; Total Public holding : 5,88,32,470 shares – 49.15 %; Book Value: Rs. 53.52; Face Value: Rs. 2.00; EPS: Rs. 23.09; Dividend: 425.00% ; P/E: 37.92 times; Ind P/E: 37.97; EV/EBITDA: 21.52.

Total Debt: 341.35 Cr; Enterprise Value: Rs. 10,800.50 Cr.

BRITANNIA INDUSTRIES LTD: The Company was founded in 1892 with an initial investment of Rs. 295.00 and is based in Bengaluru, India. It was earlier known as Britannia Biscuit Company and changed its name to Britannia Industries Ltd in 1979. The company is the subsidiary of Associated Biscuits International Limited. The company offered 18,00,000 shares of Rs. 10 each at a premium of Rs. 5 to the general public in the January, 1978. Britannia Industries Limited engages in the production and sale of bakery and dairy products in India and internationally. Its Bakery products include biscuits, bread, cakes, and rusk; and Dairy products comprise milk, butter, cheese, ghee, and dahi (curd), as well as milk-based ready to drink beverages and dairy whiteners. The company offers its products under various brands, including Tiger, Good Day, 50-50, Marie Gold, Treat, Milk Bikis, NutriChoice, Time Pass, Pure Magic, Little Hearts, Nice Time, Greetings, Premium Bake, and Healthy Start. It also manufactures and sells gourmet bakery products, which include specialty breads, cakes, pastries, and cookies through the company’s own retail stores under the brand name of Daily Bread. Its subsidiaries include AL Sallan Food Industries Co SAOC, Britannia Dairy Pvt. Ltd, Boribunder Finance & Investment Pvt. Ltd, Daily Bread Gourmet Foods (India) Pvt. Ltd, Ganges Vally Foods Pvt. Ltd, International Bakery Products Ltd, Sunrise Biscuits Co. Pvt. Ltd, Manna Foods Pvt. Ltd, J.B Mangaram Foods Pvt. Ltd. Britannia Ind Ltd is locally compared with Parle Products, Nestle India Ltd, Ruchi Soya Industries Ltd, Heritage Foods Ltd, Kwality Ltd, ITC Ltd, and Globally with United Biscuits of UK, ConAgra Foods Inc of USA, Kraft Food Group Inc of USA, Hershey Company of United States of America, Campbell Soup Company of USA, Dean Foods Co of USA, LaSalle Brands Co of USA, Enlightened Gourmet Inc of USA,  PepsiCo USA, Iwatsuka Confectionery Company Ltd of Japan, Bourbon Corporation of Japan, Kameda Seika Co., Ltd of Japan.

Investment Rationale:

Bakery is a traditional activity and occupies an important place in food processing industry. The bakery manufactures in India can be differentiated into Bread, Biscuits and Cakes. About 1.3 million tonnes of the bakery products industry in India is in organized sector out of 3 million tonnes whereas the rest are from unorganised and small scale local manufactures. Bakery products are an item of mass consumption which are low priced and has rapid growth. With changing eating habits of people, bakery products have gained popularity among masses. The unorganized sector accounts to about half of the total biscuit production estimated at 1.5 million tonnes. It also account for 85 % of total bread production and around 90 % of the bakery products estimated at 0.60 million tonnes, this includes pastries, cakes,buns, rusks and others. Biscuit market growth has although slowed down as indexed sales growth has registered only 35 % of earlier levels, the pace of premiumisation has also slowed down a bit, however Britannia’s premium brands straddle across price points and are affordable, enabling the company to sustain its growth in this environment. Good monsoons and Food Security bill would be seen as a boost to company’s growth rates in coming quarters. The rural India offers huge growth opportunity as Britannia’s market share in rural India is only 70 % of its urban share from the total market share of 33 %. With strong brand equity and pricing power can increase growth significantly, although the efficient and cost effective distribution remains a challenge for this company. Britannia plans a capex of around Rs. 450 Cr aiming at Bigger Units with a capacity of 15000 MT per unit; multiples lines of 3 per unit; fiscal benefits of VAT refund in Bihar and Orissa for 10 years estimated to be around Rs. 18 Cr in FY13. Britannia has reduced conversion costs by 0.90 % and overheads by 1.10 % in 1QFY14. The Cost reduction were in freight, energy (bio mass in new units), raw material sourcing (reverse auction) and distribution (integration of dairy and bakery, low volume SKU rationalisation) has led to these savings. Management is aiming at simplifying the systems and processes with focus on bigger manufacturing plants, bigger innovations, lean organisation structure and better distribution which will enable further cost reduction in coming periods as well. Volatility in input costs remains a challenge; however recent quarters show benefits of cost control measures in a stable input cost scenario. While stable input costs environment have aided this improvement, the company’s cost rationalisation efforts across the value chain have started bearing fruit. In addition to increasing premiumisation, company has worked on saving energy and distribution costs, improving revenue per employee and better manufacturing technology in its bid to improve profitability. Britannia will continue with its focus on improving margins and the management expects to maintain margins going forward as well. Stable input prices (led by a good monsoon) will also support margins. It is expected that the to expand by 2.20 % over FY13-15, led by favourable base and premiumisation benefits. EBITDA margins could see an expansion of 1.60 % over FY13-15 to 7.4 %, this margin expansion is significant given the slowing down biscuits segment (in sync with overall consumption slowdown). In the June 2013 quarter, biscuits category growth stood at one-thirds of that witnessed in June 2012 quarter. Thus, focus on profitability will enable Britannia to minimise the impact of the slowdown.

Outlook and Valuation: 

The branded packaged segment in this sector had a size of Rs. 17,000 Cr in last fiscal and is expected to grow at 13 % - 15 % in next 3-4 years. Within biscuits there are few players like Parle, ITC and Cadbury which commands about 75 % of market share. The bakery industry has achieved 3 positions in generating revenue among the processed food sector. The market size for the industry is expected to be at US$ 760 Cr by 2015, and the shining star of the sector will be Biscuits Industry. The per capita consumption of bakery products in India is very low, about 1 to 2 kgs per annum, which is comparatively much lower than the developed countries where consumption is between 10 and 50 kg per annum. The growth rate of bakery products has been tremendous in both urban and rural areas. Britannia is stepping up its rural presence as well as expanding its food and snacks portfolio to drive long-term growth. Notably, rural markets have remained fairly stable as compared to urban markets during this slowdown and hence, company’s strategy of increasing rural penetration seems to be appropriate. Improved financial health of its Dairy and International businesses will also aid growth. While an unprecedented rise in input costs remains the key risk, monetisation of its land assets at Chennai and Bengaluru will act as key stock price catalysts. Management believes that a 2.00 % decline in overheads led by reduction in energy cost, freight, distribution, proprietary technology and own manufacturing units is sustainable Key brands like 50‐50, Goodday, Mariegold and Milk Bikis which have sustained high double digit growth rates Britannia is following 3 pronged strategy based on Innovation, cost control and revenue management to drive profitable growth for the company. Company is looking forward to restructure its cost base by implementing comprehensive projects from design to delivery. Company also focuses on its revenue management by differentiating brands and differentiating pricing. Gross Margins have expanded by 2.50 %, while EBITDA margins have expanded by 3.30 %. Britannia had a strong run in the recent past at the bourses on the back of significant improvement in its profitability which has supported its financial performance in the current slowing demand scenario. The company’s strong brands, improving sales mix (in favour of premium products) and healthy cash generation are its key positives. Most analysts remain positive on the company and expect 15-18 % from current levels. Britannia is trading at 23.3 times FY14 estimated earnings and at 15-25 % discount to listed peers ITC, Nestle, Marico & GSK Consumer, largely due to low operating margin. However, due to on-going structural changes in company’s revenue and product mix, the operating margin will improve and this discount could narrow down gradually. The global baked goods market has shown rapid recovery following the economic recession, recording strong growth over recent years. Factors fuelling market expansion include convenience, affordability and health benefits of baked goods products. Demand for healthier fortified baked products has also driven sales. At the current market price of Rs. 875.60, the stock P/E ratio is at 32.55 x FY14E and 24.45 x FY15E respectively. Company’s Earnings per share (EPS) of the company for FY14E and FY15E is seen at Rs. 26.90 and Rs. 35.80 respectively. Britannia Ind could be good buy for the target price of Rs. 1010 for Medium to Long term investment.

KEY FINANCIALS	FY12	FY13	FY14E	FY15E
SALES (₹ Crs)	4,974.20	5,615.50	6,505.10	7,603.40
NET PROFIT (₹ Cr)	186.80	233.90	321.30	427.50
EPS (₹)	15.60	19.60	26.90	35.80
PE (x)	44.90	35.90	26.10	19.60
P/BV (x)	16.10	13.00	10.60	8.30
EV/EBITDA (x)	30.40	22.90	15.60	12.00
ROE (%)	38.50	40.20	44.70	47.40
ROCE (%)	22.70	27.70	35.40	40.80

I would buy BRITANNIA INDUSTRIES LTD for Medium to Long term for target of Rs. 1010. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or ₹ 805.55 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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PVR LTD: CASHING ON DIWALI RELEASES !!!

Scrip Code: 532689/ PVR

CMP:  Rs. 495.15; Accumulate between 475 - 495 levels.

Medium to Long term Target – Rs. 522.50 - 544.50; STOP LOSS – Rs. 437.00; Market Cap: Rs. 1,961.63 Cr; 52 Week High/Low: Rs. 565.85 / Rs. 202.55

Total Shares: 3,96,16,995 shares; Promoters : 1,22,95,970 shares –31.04 %; Total Public holding : 2,73,21,025 shares – 68.96 %; Book Value: Rs. 157.20; Face Value: Rs. 10.00; EPS: Rs. 15.39; Dividend: 10.00% ; P/E: 32.17 times; Ind P/E: 33.37; EV/EBITDA: 20.36.

Total Debt: 601.44 Cr; Enterprise Value: Rs. 2,277.14 Cr.

PVR: PVR Limited was incorporated in 1995 and is based in Gurgaon, India. PVR LTD was incorporated in April 1995 pursuant to a joint venture agreement between Priya Exhibitors Private Limited and Village Roadshow Limited, one of the largest exhibition companies in the world. PVR Limited is an India-based company that operates movie houses in India. PVR Ltd came with an IPO on 8th December 2005 with an issue price of Rs. 225/share and raised about Rs. 173.25 Cr with an objective to utilize the proceeds to finance the then new cinema projects in various cities across the country, to expand the film distribution business, technological up gradation and renovation of cinemas. The Company also generates revenue from in-cinema advertisements/product displays and in-cinema sale of food and beverages. It also produces and co-produces movies; and distributes movies, as well as operates 24 lane bowling centers. The company operates 213 screens in 46 cinemas in 27 cities. Company’s subsidiaries include CR Retail Malls (India) Limited (CRR), PVR Pictures Limited (PVR Pictures) and PVR bluO Entertainment Limited (PVR bluO). The Company has diverse cinema circuit in India consisting of 35 Cinemas with 154 screens spread over 20 different cities: Delhi, Faridabad, Gurgaon, Ludhiana, Ghaziabad, Mumbai, Bangalore, Hyderabad, Chennai, Lucknow, Indore, Aurangabad, Baroda, Allahabad, Ahmedabad, Udaipur, Chandigarh, Surat, Latur and Raipur. PVR Ltd announced the opening of a multiplex on August 15, 2012, at Empress Mall, in Nagpur in the state of Maharashtra. The multiplex consists of five screens. On January 8, 2013, PVR through its wholly owned subsidiary Cine Hospitality Private Ltd purchased a controlling stake of over 69 % followed by the open offer for another 26% in the Cinemax India Limited for Rs. 395 Cr or Rs. 203.65 per share from the Rashesh Kanakia and family. PVR Ltd is locally compared with Prime Focus ltd, Reliance Broadcast Network Ltd, Balaji Telefilms ltd, Media Matrix Worldwide Ltd, Shree Ashtavinayak Cine Vision Ltd, Tips Industries Ltd, Fame India Limited, Cinemax Properties Ltd, Era E Zone (India) Ltd, Pyramid Saimira Theatre Limited and Inox Leisure Ltd and globally compared with Walt Disney Co of US California, Time Warner Inc of USA, IG Port Incorporated of Japan, Twenty First Century Fox, Inc of New York, Lions Gate Entertainment Corp of California,  UTV Media PLC of UK, Dreamworks Animation Skg Inc of California, Orange Sky Golden Har. Ente. Holdings Ltd of Hong Kong, Kinepolis Group NV of Belgium, Cinemax X AG of Germany, Digital Cinema Destination Corp of United States and Reading International Inc of United states.

Investment Rationale:

Priya Village Roadshow (PVR) Cinemas is a leading cinema chains in India. The company began as a joint venture agreement between Priya Exhibitors Private Limited and Village Roadshow limited in 1995 with 60:40 ratios. PVR is on a spree of opening new multiplexes it opened cinema halls in Ambience mall, Gurgaon in 2007 named “PVR Ambinece Premier” as first 2K Dolby Digital multiplex with five Premier class auditoria and two Glod Class auditoria. Currently PVR controls 398 including 135 Screens with Cinemax India Ltd at 92 locations across 37 cities in 13 States and 1 Union Territory. It also plans to open another 500 screens by 2015. PVR commands a significant presence in New Delhi and NCR with 55 screens in 16 multiplexes. PVR also has its strong presence in Chandigarh, Bhopal, Ludhiana, Nagpur, Chennai, Lucknow, Indore, Hyderabad, Bangaluru, Mumbai, Nanded, Ahmedabad, Kochi, Udaipur, Vijayawada and Visakhapatnam. PVR recently launched its premium brand, PVR Premiere, targeting urban consumers in metros. The company operates three other brands, PVR Talkies, the no-frills cinemas for consumers in tier II cities, the original PVR Cinemas targeted at the urban & semi-urban consumers and PVR Director's Cut for ultra luxury watching. Recently PVR opened a Multiplex at Diamond Plaza Mall, Jassore Road, Kolkata in the State of West Bengal, this is of Five Screens Multiplex and is fitted with latest Sound and Projection System. PVR opened another Multiplex at Koregaon Plaza Mall, Pune, Maharashtra; this is a Seven Screens Multiplex with 1519 Seats operational from 8 September 2013 fitted with latest Sound and Projection System. PVR has witnessed a very good increase in Footfalls and Average Ticket Price. The footfalls in Q1FY14 were higher on account of the good box office performance by movies like Yeh Jawani Hai Deewani, Raanjhnaa and Aashiqui 2. Footfalls increased from 1.15 Cr in Q4FY13 to 1.51 Cr in the current quarter. The addition of 23 new screens in the PVR portfolio helped to the increase the footfalls numbers. The company has also been able to report an impressive hike in ATP, which increased from Rs. 172 and Rs. 153 in Q4FY13 to Rs. 174 and Rs. 160 for PVR and Cinemax properties, respectively. The management indicated the ATPs of screens with similar stature of PVR and Cinemax would converge subsequently as the company would hike Cinemax’s ATP as and where suitable. PVR reported its Q1FY14 numbers, with a top line of Rs. 335.2 crore on the back of higher-than-expected footfalls, which increased to 1.51 Cr. The company reported a consolidated EBITDA margin of 17.7 % while the EBITDA for the quarter stood at Rs. 59.4 crore, growing 76 % YoY. However, exceptional item on account of write-off of CWIP towards discontinued projects and provisions for items under litigation marred PAT, which came in at Rs. 13.6 crore. The property expansion in this quarter has been impressive along with remarkable increase in ATP. It is expected that PVR could launch 48 more screens in this fiscal.

Outlook and Valuation:

PVR DIRECTORS CUT VASANT KUNJ

The recent KPMG report anticipates the market size of Indian Music & Entertainment sector to touch Rs 1,45,700 Cr (US$ 25.51 billion) by 2016. There is increased penetration in Indian markets, which is expected to even intensify further, owing to a revolution brought in by digital technology. Wireless broadband, growing internet usage, cable digitisation and higher DTH adoption would further drive Indian M&E industry. The report also noted that smart phones, tablets, gaming devices have laid the foundation of a new wave in the industry. There are 10 number of screens per 10 lakh people in India as against 120 screens per 10 lakh people in USA. A stream of several successful Hindi and English film releases drove PVR’s strong results. Every ticket of Rs. 100 sold is divided as Rs. 20 as entertainment tax, Rs. 36 to distributors and then Rs. 44 for the multiplexs. Multiplexes enjoys margin of around 30 % on Exhibition, margin of around 65 % on food & berverages and margin of around 80 % on advertisement - translating into revenue of around Rs. 68 for exhibition, Rs. 25 for food & berverages and Rs. 7 for advertisment. On a comparable basis, combined revenues and EBITDA for PVR and Cinemax were up respectively 23 % and 9 %. Revenues and EBITDA for 1QFY14 came 6 % ahead of our estimates, following stronger-than-expected footfalls and average ticket prices (ATP). ATP for Cinemax now stands at Rs. 160, versus Rs. 174 for PVR. Lack of operating leverage suggests a likely increase in repairs, maintenance and general upkeep expenses to improve the quality of service / experience offered to visitors. It is believed that buoyancy in the film industry continues to drive the results, the Film exhibition revenue has registered a 17 % CAGR over CY10-12. In CY13 so far, net box-office collections from Hindi and Hollywood films climbed 27 % yoy. During 1QFY14, collections were up 39%. In the past six months the company’s valuations have surged owing to its strong business and earnings growth in FY13, and the Cinemax acquisition (which marks major industry consolidation). The stock trades at 18x oneyear forward-PE, broadly similar to the average of the last six months. It is expected that this valuations to be sustained by growth in the industry and for the company. A 50-bp drop in the average occupancy ratio erodes could effect the price of the stock by 5 %. At the current market price of Rs. 495.15, the stock P/E ratio is at 22.92 x FY14E and 18.33 x FY15E respectively. Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs. 21.60 and Rs. 27.00 respectively. The content pipeline of the company is exciting, with big releases this diwali like Hrithik Roshan starrer Krish-3, Ranveer and Deepika starrer RAMLEELA, Imran and Karina Starrer Gori Tere Pyaar Mein and Sunny deol's action movie Singh Sahab The Great, will be an great oppurtunity for PVR and would be benefited as a major market share holder. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also. Eros is trading at a significant discount to other media businesses. Factoring in revenue and PAT CAGR of 17.4% and 14.3%, respectively, in FY13-15, PVR Cinemas could be a good ‘BUY’ with a target price range of Rs. 522.50 - 544.50 for Medium to Long term investment

KEY FINANCIALS	FY12	FY13E	FY14E	FY15E
SALES (₹ Crs)	513.10	809.70	1,410.50	1,595.40
NET PROFIT (₹ Cr)	25.40	44.50	85.70	107.10
EPS (₹)	9.80	11.20	21.60	27.00
PE (x)	35.70	31.20	16.20	13.00
P/BV (x)	3.30	2.20	1.90	1.70
EV/EBITDA (x)	19.40	15.80	7.40	6.10
ROE (%)	9.10	6.90	11.80	12.90
ROCE (%)	9.00	6.00	11.30	11.90

I would buy PVR LTD for Medium to Long term for target of Rs. 522.5 - 544.50. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or ₹ 437.00 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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GILLETTE INDIA LTD : READY TO FLY HIGH !!!

Scrip Code: 507815/ GILLETTE

CMP:  Rs. 2116.55; Buy at current levels and Accumulate at every dips. 
Medium to Long term Target – Rs. 2500; STOP LOSS – Rs. 1947.22; Market Cap: Rs. 6,896.82 Cr; 52 Week High/Low: Rs. 2600.00 / Rs. 1849.95.

Total Shares: 3,25,85,217 shares; Promoters : 2,89,21,489 shares – 88.76 %; Total Public holding : 36,63,728 shares – 11.24 %; Book Value: Rs. 216.79; Face Value: Rs. 10.00; EPS: Rs. 26.75; Dividend: 150.00% ; P/E: 79.12 times; Ind P/E: 39.77; EV/EBITDA: 40.01.

Total Debt: ZERO Cr; Enterprise Value: Rs. 6,784.89 Cr.

GILLETTE INDIA LTD: GILLETTE was incorporated in 1984 was originally incorporated on 9 February at Rajasthan, and in 2006 it shifted its base to Mumbai, India. The company was jointly promoted by House of Poddar Enterprise (HOPE) and Gillette Company, U.S.A (Gillette). The company was formerly known as Indian Shaving Products Limited, and is now a subsidiary of Procter & Gamble India Holdings B.V. Gillette India Ltd is a Fast Moving Consumer Goods company. The Company manufactures stainless steel razor blades. The company offered 19,49,600 shares at par to the general public on Oct of 1985. In 1991, the company issued 19,31,800 equity shares of Rs. 10 each at a premium of Rs. 110 per share to Gillette USA and the company was granted the permission to use the brand name GILLETTE this enabled company to achieve higher sales and brought company to the path of profit growth. Gillette India Limited offers personal grooming, oral care, and portable power products in India and internationally. It provides personal grooming products, such as blades, razors, and toiletries under the Gillette brand; oral care products, including tooth brushes and other oral care products under the Oral-B brand; and portable power products comprising batteries under the Duracell brand. Its products include razors and cartridges, twin type shaving system and cartridges, blades, single edge blade sets, safety razor blades, tooth brushes and batteries. The Company operates in three segments: Grooming - which include blades, razors and toiletries; Portable Power -which include batteries and Oral Care - which include tooth brushes and oral care products. Mach3 is its blades and razors brand. The personal care category of the male grooming business includes pre-shave/post-shave products (shaving cream and gel) and deodorants. As of March 31, 2013, it had two manufacturing plants in Rajasthan and Himachal Pradesh, India. Gillette India’s subsidiaries include Sabre Pens Ltd, Sheen Dental Products ltd, Klosershav products Ltd and Vanity Cosmetic ltd and Wella India Haircosmetics Private Ltd formerly known as Gillette Group India Private Ltd and is also an investing company. GILLETTE INDIA LTD is locally compared with Emami Ltd. JHS Svendgarrd Laboratories Ltd, Marico Ltd, Farmax India Ltd, Goderaj Consumer Products Ltd, Dabur India Ltd, Bajaj Corp Ltd, Amar Remedies, Colgate Palmolive, P&G, and Globally with Avon Products of USA, Revlon Inc of USA, Prestige Brands Holdings Korea Kolmr Co Ltd of south korea and Kenkou Corporation Incorporated of japan.

Investment Rationale:

The Indian FMCG sector is ranked fourth largest in the Indian economy and has a market size of $1,310 Cr. The FMCG sector has attracted a large number of consumers in both the urban and rural sectors of India in the past few decades through better penetration and low-priced products. Various manufacturers of FMCG products are concentrating on increasing their sales volume due to the rising demand of the consumers. To be successful in this sector, the company must have major attributes like Innovative product, affordability and distribution. Large scale FMCG companies like Gillette have won the hearts of consumers by delivering high-end and innovative products at an affordable price. A large number of FMCG companies derive a significant proportion of their overall sales from outside the top few 100 towns/cities, which reflects the growing economic importance of India’s rural consumer base. Rural India accounts for close to one-third of the total consumption pie. Robust consumption in the rural economy is one of the key drivers of India’s sustained growth. FMCG companies are devising exclusive rural marketing strategies to tap the rural consumer base. The Blades & Razors sector is a huge category and represents a sizable growth opportunity for this company. According to market research data, the Blades and Razors market alone is estimated to be over Rs. 1400 Cr, and about 550 Cr units in size. The Oral Care category gives an unique opportunities and challenges in India. Manual toothbrushes are a key part of Oral Hygiene with opportunity for better penetration and trade-up and this continue to dominate the Oral Care market in India. According to market research data, the toothbrush market is estimated to be over Rs. 1200 Crs and growing at a rate of 10 % per year. The growing usage in the high and mid-range devices like toys and digital cameras and increase in purchasing power in India indicates a robust potential in the coming years for alkaline batteries and thus for Duracell one of the products offered by Gillette, would be benefited by this. The company’s net sales registered a 16.78 % increase and stood at a record Rs. 392.96 Cr from Rs. 336.49 Cr over the corresponding quarter last year. The company’s net profit registered a 20.04 % increase and stood at a record Rs. 16.47 Cr from Rs. 13.72 Cr over the corresponding quarter last year. Gillette India Ltd has recommended a dividend of Rs. 15 per Equity Share (Nominal Value of Rs. 10/- each), for the Financial Year ended June 30, 2013. The growth in the Company’s business was driven by the early pipeline sales from the launch of Oral-B Toothpaste, marketing. The launch expenses will begin in the quarter ending Sept. 2013. Net Sales and PAT of the company are expected to grow at a CAGR of 13 % & 10 % over 2012 to 2015E respectively.

Outlook and Valuation:

Gillette India – The Company was formerly known as Indian Shaving Products Limited promoted by Mr. Saroj K Poddar, in 1991 Gillette Company USA became Co-promoter in the company, later on in October 2005, Gillette Company USA was acquired worldwide through a merger by Procter & Gamble Company USA. Currently, in order to comply with SEBI’s minimum 25 % public shareholding, from 26 September 2013 onwards - the shareholding of Poddar Heritage Group agreed to be part of public shareholding subject to certain fulfillment of conditions as – 1) Poddar group shall have no special rights in Gillette India through any formal or informal arrangements other than that of a normal public shareholder. 2) Entities belonging to Poddar group shall not hold any key management personnel position in Gillette India and other group companies, of Procter & Gamble through any formal or informal arrangements. 3) If any entities belonging to Poddar group prompters want to be classified as promoters of Gillette India again in future they shall be required to make an open offer and no exemption shall be given in this regard. 4) There shall no acquisition of shares of Gillette India by Poddar group for the period of one year from the date of reclassification of Poddar group as public shareholder. Currently, Poddar Heritage group holds 12.86 % of issued and paid up capital of Gillette India and is co-promoter with P&G which holds 75.90 %. The said arrangement will mean that there will be complete termination of prior agreements between P&G and Poddar Heritage Group in relation to Gillette India. In order to pare down the stake of the Poddar Heritage group to less than 5 % in the company, they would have to undertake an OFS of 8.77 % i.e. 7.87 % by Poddar and 0.90 % by P&G instead of 6.90 %, this means that there will be an OFS of around 25,36,415 shares. Poddars have agreed to the said proposal, post agreement Poddar's will held 4.99 % and P&G will hold 75 % in Gillette India. For the termination of the shareholder agreement with P&G, P&G will directly pay the Poddars the severance package as compensation (amount not known) and this payment will not be from Gillette India - this should be seen as positive. The OFS will increase the free float factor of the stock by 0.10 to 0.25 post OFS, the OFS could be for around Rs. 600-700 Cr, and the public holding could be of 62,20,143 shares or 19.02 plus the 4.99 % of Poddar now as public share holder. At the current market price of Rs. 2116.55, the stock P/E ratio is at 75.18 x FY14E and 68.58 x FY15E respectively. Company’s Earnings per share (EPS) of the company for FY14E and FY15E is seen at Rs. 28.15 and Rs. 30.86 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 13 % and 10 % over 2012 to 2015E respectively. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also. Gillette India could be good buy for the target price of Rs. 2500 for Medium to Long term investment.

KEY FINANCIALS	FY12	FY13E	FY14E	FY15E
SALES (₹ Crs)	1,232.90	1,437.72	1,639.00	1,791.42
NET PROFIT (₹ Cr)	75.73	87.16	91.73	100.58
EPS (₹)	23.24	26.74	28.15	30.86
PE (x)	89.90	78.11	74.21	67.68
P/BV (x)	10.99	10.49	10.01	9.60
EV/EBITDA (x)	48.31	40.14	37.54	34.13
ROE (%)	9.10	6.90	11.80	12.90
ROCE (%)	26.62	30.95	31.91	33.92

I would buy GILLETTE INDIA LTD for Medium to Long term for target of Rs. 2500. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or ₹ 1947.22 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

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