COMPANY OVERVIEW:
The company was originally established and developed by Godfrey Phillip ltd London, a publicly owned cigarette and tobacco company with extensive international operation. In 1968 Philip Morris International Finance Corporation, a wholly owned subsidiary of Philip Morris U.S.A. acquired full ownership of Godfrey Phillip ltd., London, U.K., which was holding company of Godfrey Phillip India ltd.
Godfrey Phillip India is the second largest player in the Indian cigarette industry. The annual turnover of the company exceed Rs1800 crores.

Distribution Network:
Products are distributed across the country by 500 distributors and 800000 retail outlets. The company has corporate office in Delhi and regional offices in 8 locations.

Brands Sold:
Stellar
I-gen
Four Square
Jaisalmer
Red & White
North Pole
Cavanders
Tipper

INVESTMENT RATIONAL:
Company is debt free company. The interest cover is as high as 45.
GPIL is India’s second largest manufacturer of cigarette.
It has backing of world’s largest cigarette manufacturer, Philip Morris.
Philip Morris is one of the largest shareholders in GPIL. As and when local partner KK Modi plan to exit. Philip Morris is ready to buy the shares. This will enhance the company’s image. The best brand from Philip Morris portfolio will flow into India through GPIL.
At current market price company is just valued at around Rs1000 crore. Which is quiet a cheap valuation for the company of this stature.
As and when company starts distribution of ‘Marlboro’ the bestselling brand in the world from Philip Morris will add to the company’s top line and bottom line.

RECENT DEVELOPMENT:
US tobacco giant Philip Morris and its Indian joint venture partner, the KK Modi group, have decided to settle their dispute
Over the sale of Marlboro cigarette in India, in what is being seen as a tactical retreat by both companies keen on gaining market share.

The board of Godfrey Phillips India (GPI), where the two firms own a 36% stake each, decided on Saturday to start negotiations with Philip Morris to market Marlboro through the GPI distribution network in India.

The two companies had clashed in 2003 after Philip Morris bypassed its Indian partner and struck an arrangement with a local distributor to sell Marlboro in India.

The US Company had said at that time Marlboro, its iconic brand immortalized by the picture of a cigarette-toting cowboy, was too precious to be given to a company not controlled by it.

The subsequent thaw and 25th April,2009 Saturday’s decision to bury the hatchet is being attributed to a serious deterioration in GPI’s competitive position and the ever increasing dominance of ITC, part owned by British American Tobacco, Philip Morris’ big global rival.

SHAREHOLDING PATTERN:

	NO.OF SHARES	% OF TOTAL
PROMOTER	7391387	71.08%
INSTITUTION	1117717	10.75%
GENERAL PUBILC	1889680	18.17%
GRAND TOTAL	10398784	100.00%

	31/03/05	31/03/06	31/03/07	31/03/08
TOTAL INCOME	1325.98	1448.48	795.09	1876.34
EXPENDITURE	-1203.76	-1336.28	-640.27	-1683.16
OPERATING PROFIT	122.22	112.2	154.82	193.18
DEPRECIATION	-16.55	-18.37	-19.07	-19.77
PBIT	105.67	93.83	135.75	173.41
INTEREST	-5.72	-2.78	-2.92	-3.67
PBT	99.95	91.05	132.83	169.74
TAX	-36.35	-39.56	-47.13	-57.52
PAT	63.6	51.49	85.7	112.22

CHANGE IN TOTAL INCOME: CAGR IN TOTAL INCOME IS 12.26%.
CHANGE IN OPERATING INCOME: CAGR IN OPEARTING INCOME IS 16.5%.
CHANGE IN NET INCOME: CAGR IN NET PROFIT IS 20.8%.

	31/03/05	31/03/06	31/03/07	31/03/08
EPS	61.15385	49.50962	82.40385	107.9038
OPM	9.217334	7.746051	19.47201	10.29558
NPM	4.796452	3.554761	10.77865	5.980792
INTEREST COVER	18.47378	33.7518	46.48973	47.25068

Key Highlights:
EPS has grown over the period at CAGR of 20.8% to Rs107.9.
OPM is maintained at 10% on an average over the period except for FY2007 period when OPM surged to 19%.
NPM is at 5% on average except for FY2007 period when NPM surged to 10%.
Interest Cover is very healthy maintained at average of 36. The company is almost debt free company.

	31/12/07	%CHANGE	31/12/08
TOTAL INCOME	247.85	25.90%	312
EXPENDITURE	-192.15		-261.85
OPERATING INCOME	55.7	-10%	50.15
DEPRECIATION	-4.93		-6.39
PBIT	50.77		43.76
INTEREST	-1.17		-1.11
PBT	49.6		42.65
TAX	-17.19		-17.23
PAT	32.41	-21.56%	25.42

Key Highlights:
Total Income moved up by 25%.
Operating Profit down by 10%.
Profit After Tax declined by 21.57%

VALUATION AND OUTLOOK:
At cmp Rs1046 the stock is trading at 9.34 xs to trailing twelve month earning. We value the company at 15X. So the fair value of the stock price comes to Rs1605 an upside of 60% from here.
The valuation of 15X is done by looking into industry average and the average PE of the company for past 5 years.

CONCLUSION:
The stock is meant for patient and risk averse investor. The time horizon is 8 to 10 months.