by Equinomics Research
Godfey Phillips, a joint venture between KK Modi and Phillip Morris
Global Brands, which is engaged in sale of branded cigarettes.
Philip Morris International Inc. (PMI) is the leading international
tobacco company, with seven of the world’s top 15 international brands,
including Marlboro, the world’s best-selling cigarette brand.
Until March 28, 2008, PMI was a wholly owned subsidiary of Altria Group,
Inc. “Altria”, since that time the company has been independent and is listed
on the New York Stock Exchange (ticker symbol “PM”). It’s international and
local brands are sold in more than 180 markets. Its brand portfolio includes
Marlboro, the world’s number one selling brand and L&M, the third most
popular brand. Overall, they are seven of the top 15 international brands in
the world, with the exception of the People’s Republic of China.
In 2013, PMI held an estimated 15.7% share of the total international
cigarette market outside of the United States, or / 28.2% excluding the
People’s Republic of China and the United States. 2013 was the sixth
consecutive year that saw us meet or exceed our mid- to long-term (annual
currency-neutral adjusted) adjusted diluted earnings per share (EPS) growth
target of 10% to 12%. This consistent level of double-digit currency-neutral
EPS growth puts us at the forefront of all major global consumer products
companies.
The stock price has corrected by about 20% in the last few months after
touching a 52-week high of Rs.3,660 in February 2014. It closed at Rs.2901
yesterday. The fall in its price is mainly due to poor performance in Jan-Mar
2014 quarter – while its operating profit fell by 21 %, its net profit fell by
36 % as its Other Income fell by 58 % and tax payments soared 38 % year on
year.
On net basis, Godfrey Phillips is a zero-debt company with cash
equivalent of Rs.180 per share. It is also reported to have 5 acres of surplus
land in Mumbai which is meant for unlocking.
The stock is available at 17x FY2014 EPS of Rs.168.81. This company has
also announced 5:1 split in its shares now. Equinomics Research believe that
this company, being engaged in cigarette business which is price inelastic, can
come back to its own normal growth in the future. Apart from turnaround in
business, any concrete development on monetization of its surplus land bank
also can help the stock to give at least 20 % return - hence, we suggest our investors to accumulate
the stock with a price target of Rs.3500. The proposed split of the
shares would also improve its liquidity and hence. Help in improving its
valuations.
Disclosure:
I, G.Chokkalingam, do not hold Godfrey Phillips directly or / indirectly
through any friends, relatives or proxies.
For more details
G.Chokkalingam
Founder & Managing Director
Equinomics Research & Advisory Pvt Ltd
18- 3/A, Ekta CHS, Shiv Dham Complex
(Opp to Oberoi Mall)
Filmcity Road, Malad (East)
Mumbai - 400 097
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