Accumulate Godrej Consumer; target of Rs 836: Emkay

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Accumulate Godrej Consumer; target of Rs 836: Emkay

Emkay Global Financial Services is bullish on Godrej Consumer Products and has recommended accumulate rating on the stock with a target of Rs 836 in its October 24, 2011 research report.

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Emkay Global Financial Services is bullish on Godrej Consumer Products and has recommended accumulate rating on the stock with a target of Rs 836 in its October 24, 2011 research report.

"Godrej Consumer Products (GCPL) reported healthy revenue growth of 24% yoy to Rs 12 bn (consolidated) aided by 24% growth in its domestic business and 24% growth (19% organic) in the international business. While favourable sales mix and effective price increases partially offset higher operating costs, consolidated EBITDA margins contracted 75 bps to 18%. Further, forex loss of Rs 166 mn marred consolidated PAT performance, which registered a muted growth of 4% yoy to Rs 1.3 bn, against our expectation of Rs 1.5 bn. Ex-forex loss, adjusted PAT is in line with our expectations."

"Domestic business witnessed robust revenue growth of 24% yoy to Rs 7.8 bn. Soaps registered strong 32% value and 19% volume growth, higher than category growth of 10% and flat volumes, driven by distribution synergies and stronger rural focus in this quarter. Household insecticide (HI) segment continued its strong performance with 29% revenue growth (double the category growth) primarily driven by volumes. Hair colours continued it modest pace at 15% revenue growth for the quarter. Also, there was pressure on EBITDA margins, which contracted 220 bps to 19% at the standalone level. This coupled with forex loss of Rs 85mn, impacted standalone PAT, which remained muted at Rs 1 bn."

"We downward revise our FY12E and FY13E earnings estimates by 8% and 6% to Rs 17.8/share and Rs 22.3/share, respectively to factor in higher raw material costs in domestic operations and an increase in consolidated borrowings (gross debt at Rs 24 bn) and thus higher interest outgo. We, however, would re-iterate that we like the company's continued focus on its core portfolio with a strong growth profile. Continued new launches and aggressive promotions will aid strong earnings CAGR of 25% over FY11-13E. Moreover, valuations at 18.1x FY13E EPS appear attractive. Hence we continue to maintain our ACCUMULATE rating on the stock with a revised target price of Rs 446/share (revised from Rs 474 per share)," says Emkay Global Financial Services research report.  

Public holding more than 90% in Indian cos

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