Buy Godrej Consumer; target of Rs 1080: Motilal Oswal

Motilal Oswal's research report on Godrej Consumer

Godrej Consumer (GCPL)’s consolidated EBITDA growth was ahead of our preview expectations (released before GCPL announced its end of quarter update) and it was even above expectations after the end of quarter update – at ~10% v/s high single-digit growth expectations. Importantly, EBITDA growth was in double digits despite ~20% YoY rise in consolidated ad-spends. Outlook on EBITDA growth for GCPL over the next few quarters is better than peers despite high ad-spend intensity, which is in line with GCPL’s strategic growth plans. Healthy pace of earnings (mid-20’s CAGR on EBITDA and PAT during FY23- FY25E) is likely to be led by: a) superior growth in highly profitable markets such as India and Indonesia; b) focus on profitability in Africa; and c) continuing working capital improvement in the overseas business.

Outlook

We maintain our BUY rating with a TP of INR1,080 (based on 40x FY25E EPS).

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