Buy Godrej Consumer; target of Rs 1150: Motilal Oswal

Motilal Oswal's research report on Godrej Consumer

GCPL’s consolidated revenue and operating profit were in line with our estimates. Adj. PAT missed our estimate by 9.7% YoY, owing to higher tax rate. GP margin expanded by 700bp YoY/80bp QoQ to 54.9%. Notably, EBITDA margin improved 320bp YoY despite a 29% rise in consolidated ad-spends. RCCL sales improved significantly QoQ to INR1.42b. Brand integration is largely finalized, and cost synergies are anticipated in 2HFY24. Management expected RCCL business EBITDA to be positive in FY24 despite the scaling up of media investment and it is on track to achieve their full-year targets.

Outlook

Healthy earnings growth (EBITDA/PAT CAGRs in mid-20s over FY23-FY25E) is likely to be driven by: a) superior growth in highly profitable markets such as India and Indonesia; b) volume growth; and c) consistent capacity enhancement through capex in the organic portfolio. We reiterate our BUY rating with a TP of INR1,150 (based on 45x FY25 EPS).