Sharekhan recommends 'buy' for Godrej Consumer Products after Q4 update

Godrej Consumer Prducts has shown improving growth prospects in key markets and delivered double-digit revenue growth beating its own expectation with steady consumer demand in domestic market, said brokerage Sharekhan. The brokerage has assigned 'buy' rating to GCPL with a price target of ₹1,100.

“We re-iterate our Buy rating on Godrej Consumer Products (GCPL) with revised PT of Rs. 1,100 and discounted valuations against peers at 44.1x/37.5x its FY24E/25E EPS makes it’s a good pick in the consumer goods space,” said brokerage Sharekhan in its report.

The brokerage said that GCPL has provided a glimpse of its improved performance in its pre-quarter update for Q4FY2023. Its business performed exceptionally well and delivered double-digit revenue growth. It noted that March quarter will be the first quarter of double digit revenue growth, with volume growth of 4-5% after six quarters of single-digit revenue growth.

FMCG major Godrej Consumer Products Ltd on Wednesday reported that it expects to  report mid-single digit consolidated volume growth and double-digit operating profit growth for the quarter ended March 2023.

The company said that the growth trends continue to improve sequentially, in its regulatory filing. Godrej Consumer Products said that it expects the quality of profit should see improvement, led by gross margin recovery and continued marketing investments translating to double-digit EBITDA growth.

GCPL said that it saw steady demand in the quarter, with FMCG sector expected to witness gradual recovery in growth rates, in India.

"The performance of our India business has exceeded expectations especially on the volume front. We expect to deliver double-digit volume and value growth," said GCPL in its regulatory filing.

It said domestic branded business growth was strong registering volume and value growth in teens.

"This is in line with our strategy of volume driven category development. Overall, the growth was broad based and led by double-digit volume and value growth in both Home Care and Personal Care," it added.

In the international business, one of the major markets of the company, Indonesia has started to see a gradual recovery in performance, with mid-single digit constant currency sales growth.

“The growth ex-Hygiene is close to double digits. We believe building blocks in Indonesia are in place to drive steady-to-strong performance in the next fiscal year.”

Godrej Africa, USA, and Middle East (GAUM) saw a temporary pause in its strong double-digit sales growth momentum, clocking higher than mid-single digit sales growth in constant currency terms.

Godrej Consumers reported 3.5 per cent rise in consolidated profit to ₹546.3 crore in the December 2022 quarter. This is against a net profit of ₹527.6 crore in the year ago period.

On Thursday, the company's scrip ended 0.21 per cent down to ₹967.6 on BSE.