Investment Pick - Godrej Consumer Products Ltd.
* Godrej Consumer Products Ltd (GCPL) reported better than expected numbers for Q1FY21 as compared to other peers. Its revenue de-grew by 1% YoY to Rs 2,327 cr as it witnessed mixed performance across markets. On operational front, EBITDA improved by 3.7% YoY to Rs 472cr, while EBITDA margin increased 90bps mainly due to lower advertisement cost (down by 45% YoY) and other expenses (down by 2.2%). Further PAT de-grew by 3.2% YoY to Rs 394.9cr, on account of exceptional item in this quarter and tax adjustment in Q1FY20.
* In the near term GCPL’s discretionary products would face challenges however larger part of portfolio i.e. hygiene and household insecticides products would continue to witness strong demand in the coming quarters. Thus from a medium to long-term growth prospects, we maintain a positive view on GCPL. Going forward, the company’s focus would be on expanding portfolio in both domestic and international markets by launching innovative products, cost optimising to protect margins and lastly investing more behind distribution and supply chain channels such as e-commerce platforms as well as via chemist would support growth. Hence we maintain a Buy on the stock with a revised target price of Rs 845.
Buy Godrej Consumer Products Ltd @ 9-12 Months CMP 705.40 TGT 845
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