Buy Godrej Consumer; target of Rs 1500: Motilal Oswal

Motilal Oswal's research report on Godrej Consumer

We note that under Sudhir Sitapati's leadership, there has been a noticeable shift in approach at Godrej Consumer (GCPL) over the last 12-18 months. The company, under his astute guidance, has adopted a growth-centric strategy, including pursuing inorganic growth, crossselling, entering new categories, expanding the total addressable market (TAM) for existing products, and more. Additionally, there has been an increase in reinvestment, particularly in marketing spending, and the company has made tough decisions such as improving inventory management for RCCL & Indonesia and closing the non-core businesses. In an environment where demand recovery is being delayed, GCPL’s internal initiatives are expected to outperform those of its competitors. The inclusion of incense sticks and liquid detergent not only expands the target market but also showcases GCPL's backend competence and growth-oriented approach. Indonesia and GAUM still offer enough headroom for EBITDA margin expansion in the coming years (details shared in specific sections). With domestic business already outperforming in volume growth, improvements in demand should further lead to a better growth trajectory for GCPL.

Outlook

The stock is trading at 54x and 47x P/E on FY25E and FY26E, respectively. We believe earnings surprises will keep the stock in flavor. Reiterate BUY with a TP of INR1,500.