Hold Godrej Consumer: Way2Wealth

Way2Wealth has recommended hold rating on Godrej Consumer Products, in its May 7, 2012 research report.

“Godrej Consumer Products, Q4FY12 standalone sales were up by 19.9% YOY to Rs784 crs. Sales grew on the back of 28% growth in household insecticides, 30% growth in soaps segment and 13% in hair colour segment. FY12 standalone sales were up by 21% YOY at Rs2933 crs. Sales grew on the back of 31% growth in household insecticides, 27% growth is soaps segment and 14% in hair colour segment. Q4FY12 consolidated sales grew by 30.9% YOY to Rs1323 crs. International business generated topline of Rs518 crs. International business witnessed health organic growth of 27% driven on the back of innovations and increased penetration. FY12 consolidated sales rose 32% to Rs4850 crs with international business contributing 38% to the topline with revenues at Rs1864 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 3-4 years."

"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 Rs553.6 the stock trades at 24x expected EPS of Rs23. We recommend the investors to “HOLD” the stock,” says Way2Wealth research report.   

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