Home >Companies >Company Results >GCPL up 6% despite weak Q4 results; growth rate likely to pick up gradually

MUMBAI: Shares of Godrej Consumer Products Ltd (GCPL) gained nearly 6% on Thursday despite weak January-March results. Analysts said the company’s domestic business was showing signs of recovery as the management takes corrective actions but the process may be gradual.

At 02:10 pm, the stock was 5.1% higher at 551.65 apiece on the BSE, while the benchmark Sensex was down 2.6% at 31,175.68 points. With today’s gain, the stock has risen 16.4% in the past one week compared with the 0.02% increase in the Sensex. It had hit a 52-week low of 425 on 23 March.

"While overall company level growth rates is likely to pick up only gradually, innovative product launches and sustained market share gains across categories will keep the company in good stead," said Edelweiss Securities.

The company's strategy of launching innovative products at disruptive price points is expected to bolster growth amid tough macroeconomic conditions. A few recent launches include liquid vaporizer segment, offers under the Protext brand, shampoos, hair colours, powder-based handwash, heena-based hair colours, neem incense sticks.

Analysts feel domestic margin is expected to expand from supply chain efficiencies led by its Project PI. The company has also guided for several cost-saving measures which are likely to boost its international business margin.

GCPL saw 12% revenue decline across the board as lockdowns in India and GUAM (Godrej Africa, USA, Middle East) disrupted prime selling days. It was on track to deliver 5% volume growth in India before covid-19 disrupted supply chain, leading to a 15% volume decline, analysts said.

"GCPL’s business will continue to be volatile due to high dependence on seasonal and competitive categories in India and high share of International business. We model 7/9% revenue/EBITDA compound annual growth rate (CAGR) for FY20-FY22. We do not see any re-rating drivers in the near term," said HDFC Securities.

However, analysts at Motilal Oswal Securities Ltd feel that with structural top-line growth outlook appearing hazy in both domestic and international businesses, there is no indication of any material improvement in the pace of earnings growth at 6.6% CAGR during FY20-22.

It said that for the first half of the decade, GCPL reported 21.7% earnings per share (EPS).

CAGR earnings growth, which has almost halved in the past five years ending FY20 where earnings growth has been a measly 9.8% CAGR on an even more modest 3.7% CAGR sales growth. “Neither the results nor management commentary indicates sharp revival in earnings momentum. In addition to the sustained weak earnings growth, GCPL’s return on equity (RoE) of less than 20% is also far lower than peers," the brokerage firm said.

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