Thursday, September 24, 2009

Godfrey Philips starts producing Marlboro

This article came out in Economic Times on 9th Sep. I don't think in any other country Philip Morris has let a partner take control of the manufacturing and distribution of Marlboro. This might not make a huge difference to GP's bottom line today, as Marlboro's share in India is really small. But nonetheless, it is a positive.

The stock is trading at less than 9x EPS - if we were to annualize 1Q10 EPS. Now, it is possible that there were some dealer inventory movements etc. in the first quarter, which boosted 1Q earnings. So we will need to wait till 2Q earnings to really figure out the pattern here. Still, the company has gone into new markets (West Bengal and Tamil Nadu) and launched Marlboro. The second largest tobacco company in India is available at less than 10x, when all other FMCG stocks are trading at 25x. Stock might go down if equity markets swing around, but to me this one is for keeps.

Disclosure: Own GP

1 comment:

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