Buy Godrej Consumer Products: target of Rs 1249: Sharekhan

Sharekhan's research report on Godrej Consumer Products

Analyst conference hosted by Mr. Sudhir Sitapati, Managing Director (MD) & CEO of GCPL, was more focused on filling the business gaps to improve the revenue and earnings growth in the medium term. However, the long-term vision of the leadership was missing in the meet. The company is aiming at achieving double-digit volume growth through penetration gains in 50% of the portfolio, moderate share gain in 50% of portfolio, consumption-led market growth, and disruptive innovation. Headwinds such as raw-material inflation and pandemic-led uncertainties will keep a toll on earnings growth in the near term. However, management is confident of achieving 150-200 bps OPM expansion, driven by better mix and cost-saving measures in the stable market environment.

Outlook

The stock has corrected by 18% in the past three months and is currently trading at a discounted valuation of 39x/33x its FY2023/FY2024E EPS. We maintain our Buy recommendation on the stock with an unchanged PT of Rs. 1,249.