Godfrey Phillips Q1 Results Review - Cigarette Volume Grew At 8.1%; Margin Slipped: Centrum Broking

Centrum Broking Report

Godfrey Phillips India Ltd. reported Q1 FY24 results beat our estimates; revenue/Ebitda/profit after tax grew 26.2%/ 21.0%/ 115.5% respectively.

Gross revenues in tobacco grew 28.7%, backed by 8.1% volume growth in cigarettes and 120% growth in leaf tobacco exports to Rs 3.1 billion, whilst non tobacco (24Seven convenience stores plus Funda Goli) grew 8.1%. Godfrey Phillips' performance was driven by-

1. clear focus on cigarette business,

2. expanded distribution for Marlboro led to 30% contribution,

3. strong exports of leaf tobacco and

4. Philip Morris International (associate company) now wiped out losses and fuelled dividend income.

Gross margin declined by 510 bp to 46.5% due to higher raw material inflation coupled with higher exports of leaf tobacco and cigarettes. Ebitda at Rs 2.4 billion grew by 21.0% despite higher other expenses (+23.9%) and employee cost (+11.8%) settling Ebitda margin at 23.2% (- 100 bp).

Godfrey Phillips has strong focus on regular size filter tip segment, yet expanded footprint for TFS (146 stores) to reflect lowering losses.

Checking better performance and higher other income, we increased our earnings and retain 'Buy', with a revised discounted cash flow-based target price Rs 2,383 (implying 13.6 times FY25E EPS).

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