Buy Godrej Consumer; target of Rs 1150: Motilal Oswal

Motilal Oswal's research report on Godrej Consumer

Godrej Consumer (GCPL) is our top pick from our Staples Coverage Universe from a oneyear horizon. We list some of our key investment arguments and aim to track the company’s progress in its segments thus far. Recent sales growth momentum encouraging: After maintaining a Neutral view on GCPL for 10 years, we turned bullish on its prospects earlier this year, as highlighted in our upgrade note from May’21; we reiterated our view in our detailed note from Jun’21. Our positive view on the investment case is bolstered by the strong revival in the domestic topline seen over the last 21 months (after a lackluster second half in the previous decade). The healthy double-digit domestic sales growth in 9MFY22 (on a double-digit base in FY21) was particularly encouraging. GCPL’s balance sheet also continued to strengthen in 1HFY22, with RoCE exceeding 20%.

Outlook

We maintain our BUY rating on the stock, with TP of INR1,150 (valuing it at 45x FY24E EPS), implying an upside of 26%.