Some updates post 2Q results from broker reports…..
The management has covered their raw material costs for the year through long-term contracts. Hence, 2Q gross margin expansion of 299bps is likely to continue in 2HFY16. The company has tied up with a third-party manufacturer in East India for supplying beverages in that market from 4QFY16 onwards at favourable terms. This, in turn, will protect gross margin of the business and help the company save on transportation costs as it was supplying the product from Chennai till date.
The management is confident of delivering 5% volume growth in the OTC business, with 5-6% of price increase in its core pain relieving balm. New format products like back-pain roll-on and feminine hygiene products are expected to grow 100% this year. The beverage business will deliver ~17-18% growth this year, given that 1HFY16 was subdued on account of a short summer and disruption in business due to assigning a third-party manufacturer for the eastern
region.
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