Shares of Godrej Consumer Products fell nearly 4 percent to Rs 1,509 apiece on August 8 after it delivered a mixed April-June quarter performance. Despite this, brokerages remain optimistic about the stock, especially after the company announced its entry into the pet food business with a Rs 500 crore investment plan.
Jefferies has issued a 'buy' recommendation for Godrej Consumer, setting a target price of Rs 1,580 per share. They anticipate that the company’s ongoing focus on new launches and its expansion into the rapidly growing pet food market to drive re-rating of the stock. Similarly, Morgan Stanley shared an 'equal-weight' on the FMCG major and put out target price at Rs 1,325 apiece.
Godrej Consumer clocked 41 percent on-year growth in consolidated net profit in Q1FY25, whereas revenue from operations fell 3.4 percent YoY. EBITDA for the quarter increased 12.7 percent YoY in Q1FY25 and EBITDA margin improved by 200 basis points YoY.
ALSO READ: Godrej Consumer Q1 Results: Net profit rises 41% on-year to Rs 451 crore, co declares Rs 5 dividend
The company is investing Rs 500 crore over the next five years to enter the pet care market through a new subsidiary, Godrej Pet Care. Pet food products will be sourced exclusively from group company Godrej Agrovet through a transfer price agreement, with the segment expected to grow in double digits over the coming years.
In India, Godrej Consumer achieved an 8 percent organic volume growth and a 10 percent overall volume growth, with strong performance in home and personal care. However, organic sales in Africa, the USA, and the Middle East declined by 10 percent in constant currency terms.
Looking ahead, the management expects the Indian business to benefit from pricing adjustments starting in Q2, with volume growth projected in the high single digits and revenue growth in the low double digits. However, higher interest rates in African markets may continue to impact volume growth in the near term.
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