Motilal Oswal neutral on Godrej Consumer; target Rs 740
Motilal Oswal has come out with its report on Godrej Consumer Products (GCPL). The research firm has maintained a neutral rating on the stock with a target price of Rs 740, in its December 20, 2012 research report.
December 21, 2012 / 15:07 IST
Motilal Oswal has come out with its report on Godrej Consumer Products (GCPL). The research firm has maintained a neutral rating on the stock with a target price of Rs 740, in its December 20, 2012 research report.
"GCPL's Indonesian business (Megasari) continues to grow (45% of international revenues), led by strong distribution and market share gains, coupled with innovative product launches (Hit Magic Paper, Hit One Push Aerosol). It would continue to report strong high teen revenue growth and be the key constituent of international business. Darling's phase II consolidation/integration is progressing on schedule and shall drive FY14 revenues. Africa (25% of revenues) would be a key growth driver in the medium term and with Indonesia, will form core of GCPL's international strategy. In Latam (19% of international revenues), Cosmetica's integration, new launches and strong investments in marketing will be the focus areas. Company shall also concentrate on utilizing Argencos' hair care technology and knowhow and cross pollination issues in other geographies.As Palm Fatty Acid Distillate (PFAD) prices have corrected by 26.5% in the past four months, it would drive soaps' margin in 2HFY13. Despite a correction in palm oil prices, GCPL has not seen a re-emergence of unbranded/regional players yet due to unfavorable exchange rates.GCPL's execution in the international business has been flawless - synergy capture, innovation and new launches being the key drivers. Performance in household insecticide (significant share gains) has been the highlight of its domestic business. We note GCPL's focus is to increase its presence in the premium space - both soaps and hair colors business. However, at 27x FY14E, we believe valuations reflect the positives. While valuation multiples are at a discount to peers, we believe this is justified given GCPL's higher proportion of overseas business (45%). Maintain Neutral with a target price of INR740," says Motilal Oswal research eport.Bodies Corporate holding more than 50% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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