Sharekhan's research report on Godrej Consumer Products
Q1FY2023 was a soft quarter for Godrej Consumer Products (GCPL) as consolidated volumes declined 5% (6% volume decline in India business) while revenue growth of 8% was primarily price-led. OPM fell by 407 bps y-o-y to 17.0% due to higher input prices. Management expects revenue growth trajectory to improve ahead given focus on category development of low-penetrated categories such as household insecticides, air and hair colour in India, higher media spends in Indonesia and simplification of Africa business’ structure. Decline in raw material prices would help margins improve in Q3; expects to maintain OPM on y-o-y basis at ~20%. Targets OPM to remain in the range of 20-22% in the medium term.
Outlook
Stock has underperformed its peers for the past one year and is trading at 42.9x/36.7x its FY2023E/24E earnings. We maintain our Buy on the stock with an unchanged PT of Rs. 959.
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