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MP Guru
STOCK UPDATE

Godrej Consumer Products
Cluster: Apple Green
Recommendation: Buy
Price target: Rs912
Current market price: Rs547

The makings of an FMCG MNC

The business outlook and strategies shared by the GCPL management in the analyst meet are in keeping with the reasons why we put a Buy on the GCPL stock (refer our Investment arguments as mentioned in our Stock Idea report "Rich lather and colour", dated December 5, 2005). There has been no deviation from our assumptions and hence we remain bullish on the stock. We continue to like GCPL considering (1) the upside in the core product categories (due to a combination of a lower market share and under-penetration of products); (2) the growth along with the widening of the product basket, which now includes shaving cream, diaper, talc powder etc; (3) the opportunity to grow across geographies with the acquisition of Keyline Brand; and (4) the healthy cash generation and profitable deployment of the cash, eg it is setting up of new capacities in Baddi (Himachal Pradesh) and Sikkim.

The stock trades at a price/earnings ratio of 17.4x FY2008E earnings and enterprise value/earnings before interest, depreciation, tax and amortisation of 14.8x FY2008E. The valuations are in line with that of its peers, which are trading in the range of 15-20x FY2008E earnings.


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SECTOR UPDATE Telecom

India's cellular subscriber base crosses 100 million
With an addition of 4.2 million new users in May, the country's cellular subscriber base has crossed the 100-milllion mark. The total subscriber base has grown by 4.4% and stands at 100.6 million as of May 2006. The addition of 3.18 million users in the month has taken the GSM subscriber base to 75.32 million. On the CDMA front, 1.1 million new users were added in May, that is a growth of 4.55% over April 2006.
 
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