Buy Godrej Consumer Products; target of Rs 1700: Motilal Oswal

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26 Aug, 2025 12:21

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Godrej Consumer Products (GCPL) has adopted a growth-oriented strategy that includes pursuing acquisitions, cross-selling, entering new categories, and expanding the Total Addressable Market (TAM) for existing products. Additionally, it has increased reinvestments, particularly in marketing (+36% YoY in FY24). The company has made strategic moves, such as improving inventory management in RCCL and Indonesia and exiting non-core businesses, to drive consistency in its performance and improve the earnings growth trajectory. In FY24, GCPL delivered a healthy performance across various regions, reporting consolidated sales growth of 6% YoY (21% in CC terms), led by volume growth of 10% (7% organic). The EBITDA margin has shown improvement across geographies, expanding 270bp YoY to 21.8%. We expect the operating margin to expand by 100bp over FY24-FY26 due to benign raw material costs, margin recovery in the GAUM region, a return to normalized operating margins in Indonesia (around mid-20s), and structural cost savings in India. EBITDA and Adj. PAT grew by 21% and 13% YoY in FY24.

We expect the company to deliver Sales/EBITDA/Adj. PAT CAGR of 9%/11%/18% over FY24-FY26E. The earnings growth trajectory is the strongest among its peers (refer to Exhibit 38). The stock trades at 66x and 54x P/E in FY25E and FY26E, respectively. We reiterate our BUY rating with a TP of INR1,700.

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