Buy Godrej Consumer; target of Rs 975: Motilal Oswal

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26 Aug, 2025 12:21

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GCPL’s 4QFY22 results were largely in line. While the management indicated a sequential gross margin pressure in 1QFY23, led by palm oil cost inflation, the repeal of the Indonesian palm oil ban from 23rd May’22 is potentially good news for subsequent quarters. The new senior management appointees from Unilever are a welcome move. Significant steps appear to have been taken to reduce complexity and SKUs, with the introduction of LUPs in HI and Hair Color to drive category growth. After the double-digit sales growth in FY21 and FY22, following a lull in the preceding five years, an incipient turnaround was evident, which will only be boosted in subsequent years by efforts as a part of the strategic refresh by the new CEO. While RM cost inflation (already part of our forecasts) can affect FY23 EPS, GCPL has the potential to deliver mid-to-high teens earnings growth beyond that. We maintain our Buy rating.

With investments by the new CEO focused on boosting growth in the high margin, high RoCE domestic business, earnings growth outlook beyond the near term is strong. Valuations of 36.9x FY24E EPS are inexpensive. We maintain our BUY rating with a target price of INR975 (45x FY24E EPS).

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