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Buy GSK Consumer, target of Rs 1000: LKP Shares

Posted on: May 6th, 2009 and is filed under Brokerage Recommendations.

LKP Shares has recommended a buy rating on GlaxoSmithKline Consumer Healthcare with a price target of Rs 1000 in its May 2, 2009 research report.

“GSKCH has clearly outperformed the BSE FMCG sector during the past three months. Q1CY’09 performance is clearly reflective of this as the company recorded the highest profit growth in the past three years despite new product launches like Horlicks Nutribar (30gm energy bar addressing the nutritional snacking space) and Chill Dood-Ready to Drink milk product having a market size of Rs 2.5 billion (although Q1CY’08 witnessed higher ad spend due to launch of Actibase and Womens Horlicks. GSKCH in Q1 posted a 48% growth in net profit at Rs 839 million (Rs 565 million) on 31% growth in revenues at Rs 5394 million (Rs 4109 million).”

“Although factors like monsoon and convalescence remain the growth drivers for MFD we believe that GSKCH could be looking at smaller SKU to spur demand from first time consumers in rural areas. Despite the fact that the malted food segment is witnessing entry of large players like HUL, Nestle and Dabur we believe that GSKCH would be able to maintain its lead in the segment and the stock trading at 12xCY’11E earnings can be accumulated with a one-year price target of Rs 1000,” says LKP Shares’ research report.

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