Buy Godrej Consumer; target of Rs 1080: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Godrej Consumer

Godrej Consumer (GCPL) is one of our top pick from our Staples Coverage Universe over a one-year horizon. We present here our investment rationale: Increasing traction in the domestic business should improve margins and return ratios. The focus on profitability improvement in the African region (GCPL’s second largest sales contributor) and continued discipline in capital allocation will reduce the historical drag on the overseas businesses. Among staples, GCPL is the key beneficiary of the recent reduction in material costs. Palm oil prices have come off significantly, and even if a reasonable share of this gain is spent on advertising, it will boost EBITDA growth from 4QFY23 onward. While the company’s target of achieving sustainable double-digit sales growth in Household Insecticides (HI) could be delayed, its other domestic segments are showing signs of promising traction.

Outlook

The valuation is inexpensive at ~34x FY25E EPS for a business that is expected to report a ~28% earnings CAGR over the next two years and RoCE of over 20% for the first time since FY11. Our SoTP-based valuation gives us a target price of INR1,080, representing a 17% upside on the CMP.

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Godrej Consumer - 06 -03 - 2023 - moti