Consolidated profit before tax (PBT) dropped 64.5 per cent to Rs 62.75 crore in Q1 June 2020 as against Rs 176.74 crore in Q1 June 2019.
The company said that the outbreak of Covid-19 pandemic and nationwide lockdown ordered by the government resulted in temporary disruption in the business operations of the group at its various manufacturing and distribution locations impacting in terms of production and sales from the second half of March 2020. Since then, the operations have been gradually resuming in line with the government directives issued in this regard from time to time.
Its cigarette domestic volume Q1FY21 declined by 47 per cent primarily due to temporary closure of factories and distribution points. Its factory at Rabale remained closed during the entire quarter resulting in loss of sales for Marlboro and export business declining 51.6 per cent.
Analysts at Centrum Broking, however, believe that Q1 was a short term blip for the company and the long-term growth drivers remain intact.
"We believe that GPIL’s efforts through its revival strategy, focusing on high growth RSFT/ DSFT segment; and by strengthening its partnership with Phillip Morris (Marlboro), are acting as the key growth engine for its distribution efforts in ITC dominated market i.e. South," wrote Shirish Pardeshi, an analyst with Centrum Broking in a co-authored note with Shubham Aggarwal.
Adding, "Despite the industry witnessing down-trading from smokers, these initiatives have yielded above industry volume growth for the company in the past resulting in market share gains to 12.9 per cent."
The brokerage has a "BUY" rating on the stock with the target price of Rs 1,320.
However, it cautions that a sharp increase in taxation, a significant increase in competitive intensity, and disruption in sales due to intermittent lockdowns could be the key risks to the company.
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