Recommendation From Packaged Foods & Pharmaceuticals Sectors

The scrips in this column have been recommended with a 15-day investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations 

GSK CONS 

CMP - Rs 6809
BSE CODE 500676
Volume 531
Face Value Rs 10
Target Rs 7340
Stoploss Rs 6335 

A packaged food company jointly promoted by Horlicks and GlaxoSmithKline holds leadership position in health food drinks (HFD) segment, majorly under Horlicks and Boost. The company enjoys volume and value market share of 64.6% and 55.3%, respectively in HFD, out of which Horlicks and Boost hold 44.2% and 11.2% shares, respectively, in value terms. During Q1FY19, the company posted nearly 12% and 51.5% YOY revenue and PAT growth, respectively, amid sharp decline in the raw material cost. However, food business decreased 5% after the company discontinued Marie, while traditional and oats category posted more than 5% growth. Sachets, which contribute 9% of total revenue, grew in high double digits. Going forward, the company is expected to incur high on advertising costs. The company would penetrate North and West regions, but maintain higher distribution focus on its core areas of South and East. Distribution would expand to e-commerce category with high-sized packs. We recommend a BUY 

AUROBINDO 

CMP - Rs 778.25
BSE CODE 524804
Volume 241000
Face Value Rs 1
Target Rs 840
Stoploss Rs 719

 

The third largest pharma company by market capitalisation generated its FY18 revenue from India (12%), USA (46.5%), Europe (31.2%). The company has posted 15.5% revenue growth, while 11.9% YOY de-growth in the bottomline. The US and EU formulations sales grew by 11.5% and 30.7% in Q1FY19. Recently, the company acquired dermatology and oral solids businesses of Sandoz Inc, USA through its USA subsidiary. The company would become second largest player in dermatology in USA and also second largest generic player in terms of prescriptions. Further, the company is expected to earn additional revenue growth of 49%, majorly coming from the US. The acquired business holds robust dermatology franchise, generating high margin. The new product launches, ARV tender supplies, controlled substances and flourishing businesses in the US under many segments would bring revival in bottomline to 56% YOY in FY20. In the quarter ended June 2018, the company’s ANDA filings number reached 342 with final approval, 33 tentative and 112 under review by USFDA. We recommend a BUY