Equity Analysis /
Bangladesh

Unilever Consumer Care: Q2 19: Growth on margin expansion; raise TP

    Auneea Haque
    Auneea Haque

    Research Associate

    IDLC Securities
    30 July 2019
    Published by

    Earnings grew by 21% amid fall in top-line and rise in opex: GLAXOW BD reported earnings of BDT 135mn (EPS BDT 11.2) in Q2 19 (Apr-Jun), rising by 207% yoy in spite of fall in top-line by 5% yoy and rise in opex/sales by 382bps. Excluding the effect of discontinued operation (Pharma segment), profit from continuing operation stood at BDT154mn, rising by BDT c21% yoy from BDT128mn in the same period, last year. Gross profit margin (GPM) expansion of c768bps yoy has mainly driven this growth. Net profit margin also expanded by 299bps yoy this quarter riding on GPM expansion.

    Reiterate Hold but increase TP to BDT 1,603: (ETR 9.1%) GLAXOW BD trades at 21.1 2019f P/E (based on earnings from continued operation), 3.1x 2019f EV/Sales. Our TP of BDT 1,603 implies 9.1% ETR (with 3.5% dividend yield). 

    Top line falls by 5% yoy, below our expectation: Revenue of GLAXOW BD stood at BDT1,087.4mn in Q2 19, down by 5% yoy from Q2 18. The company’s 94% of revenue comes from powder. GLAXOW BD is the market leader in HFD industry obtaining c96% market share already. Currently, the company is going through a transition phase, as Unilever is to acquire 82% of the shares GSKBD. We believe, this was one of the reasons behind fall in top-line this quarter along with the continued illegal import from India. Provided revenue has been below our expectation, we are revising revenue forecast downward from 12% yoy growth to 0.6% yoy growth for full year 2019. 

    We revise our 2019 GPM upward to 48.4% from 46.0%, since the Q2 GPM beat our expectation. As the positive effect of GPM expansion offsets the fall in revenue, we are revising our NPAT expectation (from continuing operation) upward for this year by 2.5% to BDT865.8mn from BDT844.3mn.