Emkay Global Financial's report on Godrej Consumer Products
GCPL hosted an interaction with Mr. Akhil Chandra, Business Head - Indonesia, to give an update on the company's performance and strategy in Indonesia. The Indonesia business, which contributes ~16%/20% to GCPL's revenues/EBITDA, slowed down in FY21 due to macroeconomic/Covid-related headwinds. GCPL expects the business to recover gradually and achieve double-digit growth. Management highlighted steady performance and market share gains in home insecticides (HI) and the success of its Saniter brand in the hygiene space, which contributes ~10% of revenues. Air fresheners, which were hit hard, have been recovering since Q1, while high competitive intensity in wet wipes has been addressed through price/pack interventions. GCPL expects to defend its high operating margins (28%) through savings in media costs and the rising GT/e-commerce share (more margin accretive vs. MT) which is likely to offset inflationary pressures. GT direct reach is likely to increase from 160,000 to 200,000.
Our estimates are unchanged as we already factor in a recovery in the Indonesia business. At 49x FY23E EPS, the stock appears fairly valued. Retain Hold with a TP of Rs1030.
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