Hold Godrej Consumer Products: Way2Wealth

Way2Wealth has recommended hold rating on Godrej Consumer Products in its November 5, 2012 research report. The research firm says Godrej Consumer is on a healthy growth trajectory for the next few years on the back of its inorganic growth, cross launches across geographies, and product innovation.

“Godrej Comsumer’s standalone net sales grew at 18.2% on the back of growth across all segments. All categories grew at faster than market. The soaps category volumes growth was at 24%. Hair colour category growth gained momentum with a 10% growth this quarter. Household insecticides grew at 3x the market pace growing at 27%+. Consolidated sales growth was driven by the integration of Darling Group & the Chilean acquisition. Currency also played a role in growth of the subsidiaries. Subsidiary sales went up from Rs419 crs. to Rs699 crs. Indonesia grew at 26% on a constant currency basis. This is on the back of success of Hit Magic Paper & new launches under the Mitu brand. Like-to like sales growth in Africa was in higher double digits YOY. Seasonally this is a weak quarter for LatAm &. Consolidated topline grew by 34.5% to Rs1595 crs.”

“GCPL is present in 3 segments namely soaps, household insecticides & hair colours. In each of these segments the company is a market leader or at No. 2 position. The company has been continuously investing in its brands to gain ground over competition and has created super brands over the decade. The company’s 3x3 strategy (presence in 3 continents and 3 categories) shows its clear focus on using its strengths rather than diversifying into the unknown. Cross synergies from continents will enable growth across geographies and segments and help the company achieve its target of 20%+ topline growth for the next 2-3 years. The company initiated launch of insecticides in Africa with entry into Nigera this quarter.”

“The company is on a healthy growth trajectory for the next few years on the back of its inorganic growth, cross launches across geographies, and product innovation. Profitability is expected to improve as the company moves to premiumise its portfolio & implement cost synergies. We like the vision of the management to grow the business while investing in emerging economies. It plans to focus on it 3 mainstay segments where it commands market leadership. At the current market price of Rs688 the stock trades at 34x expected EPS of Rs20. We recommend the investors to hold the stock,” says Way2Wealth research report.

FIIs holding more than 30% in Indian cos

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