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Revenue growth continues to be strong: Godrej Consumer for the yet another quarter reported strong growth. Its revenue came in at Rs 3,449cr, up by 10.4% YoY and underlying volume growth of 10% YoY while sequentially growth was at 7.8%. Overall it was a volume led growth and all its geographies as well as business segments contributed to the growth.

Healthy margins improvement: Gross profit was at Rs 1,853cr, up by 27.3% YoY and 9.5% QoQ and margins improved by 715bps YoY and 84bps QoQ to 53.7% led by easing raw material cost and lowering of inventories. Further, despite higher spends on advertisements, GCPL managed to post decent EBITDA growth of 23.4% YoY to Rs 643cr while sequentially growth was flat. EBITDA margins increased by 197bps YoY but decreased by 139bps QoQ to 18.6%. PAT reported was Rs 319cr, down by 7.6% YoY and 29.5% QoQ due to higher depreciation, interest and one-time exceptional cost on account of acquisition of Raymond Consumer Care Business and some restructuring cost. Adjusted PAT (without exceptional) grew by 16.1% YoY and margins at 11.6%.

Concall highlights: 1) Management focus is on driving volume led growth, investing behind brands and developing categories as well as improving profits. 2) Plan is to invest Rs 900cr in organic manufacturing over next 3 years which would expand its manufacturing capacity by 20% for both Home and personal care. 3) Innovations continued with Aer O car air fresheners and magic floor cleaner. 4) Focus on increasing distribution of access packs amongst products. 5) Raymonds business is growing as per plan, this quarter they reduced channel inventory and took stock returns. 6) Price cuts were taken in the personal care segment.

Valuation: Overall results were better than expected with double digit volume and value growth. Management commentary seems to be positive as their focus was to drive volume led growth by investing behind core brands, developing access packs and increasing distribution reach. Further, their aim is to improve profitability by controlling cost but at the same time invest in advertisements & promotional activity for branding. We believe the company is driving in the right direction and focusing on innovations, brand building, expanding reach while easing raw material, focus on cost efficiency and adding capacity will aid in both revenue and profit growth. On the financial front, we have marginally tweaked our estimates taking into consideration easing RM cost and higher media spends which led to marginal improvement of EBITDA. Thus, we expect revenue/EBITDA to grow at 15%/20% CAGR over FY23-25E and remain optimistic on GCPL growth prospects ahead. We have maintained a Buy rating but our target price revised upwards to Rs 1,191.

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