Since the West Asia war began, Godrej Consumer Products Ltd’s (GCPL) shares had dropped nearly 18% till Monday when it announced its March quarter (Q4FY26) business update. The shares have gained about 8% in the past two trading sessions.
Margin pressures, given the higher palm oil price, seem to be worrying investors. The management’s outlook on margin should bring some comfort. GCPL, in its update, said with prices of Brent crude at $100-110 per barrel and palm oil at Malaysian Ringgit 4500-4800 per tonne, it expects a cost hit of 6-9% going into FY27. The company will offset this through price hikes, cost savings, and media optimization.
GCPL believes elevated costs augur well for formalization of demand in select categories. So, “even if costs remain at these levels, we should be broadly in line with our original bottom line plans for FY27 while stepping up revenue growth,” said GCPL.
Standalone Q4FY26 Ebitda margin is expected to sustain within its normative range (24-26%), aided by significant cost savings. Excluding soaps, Q4 volume growth continues in double-digits.
Nomura Research expects home-care segment (45% of FY25 India sales) sales growth of close to double-digits with household insecticides growing in high single-digit, and the new/growth business growing over 15%.
Nomura expects personal care category (51% of FY25 India sales) to report mid-single-digit growth with benefits of restocking of soaps (seen in Q3) fading away in Q4, while hair colours and deos grow in high-single-digits.
Meanwhile, Indonesia business is stabilizing after a period of intense competition, while GAUM (Africa, US, Middle East) segment continues to deliver double-digit growth. These markets are skewed toward categories like hair care and household insecticides, which have stronger growth profiles than soaps.
Q4FY26 consolidated revenue is seen rising in almost double-digit year-on-year, a tad better than expectations. GCPL’s 9MFY26 consolidated revenue grew 8%. Q4 Ebitda growth should be broadly in line with revenue growth.
GCPL is set to benefit from enhanced contribution from high-growth categories, better mix, and firm realizations aided by price hikes. This positions the company for revenue acceleration in FY27, despite inflationary pressure.
That said, investors seem to be factoring the optimism adequately with the stock trading at around 38 times FY28 estimated earnings, as per Bloomberg. Any sharper-than-expected spike in input costs or delay in price hikes could lead to temporary margin compression, especially given the lag between cost inflation and price hikes.