Buy Calls – GSK Consumer
Investors seeking a defensive option for their portfolio can consider adding the GlaxoSmithkline Consumer Healthcare (GSK Consumer) stock. The current market price of Rs 1,496 discounts estimated 2011 earnings by about 18 times (Nestle and Dabur India trade at 24-26 times).
The company closed Calendar 2009 with sales growth of 25 per cent, managed almost evenly across the four quarters, with matching profit growth. Several years of operating in just one product segment had kept the stock’s valuations low, but a frenetic pace of new launches over the past year (Horlicks Lite, Actigrow, ProHeight and recently Foodles) promises to remedy this. Though rising prices of inputs (malted barley, milk), as also rising ad spend pose a threat to margins, a 61-per-cent market share in its key segment gives the company considerable pricing power.
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