Buy Godrej Consumer Ltd. For Target Rs. 1,400- Motilal Oswal Financial Services
* Domestic revenue is impacted by weakness in the soaps and HI segments. We model 3% standalone revenue growth and 1% volume growth. The rest of the portfolio performed well.
* High inflation is putting pressure on margins. We model 100bp YoY decline in GP margin and 380bp YoY decline in EBITDA margins due to negative operating leverage.
* GCPL highlighted in mid pre-quarter update that soaps category (one-third revenue contribution) impacted by increase in palm oil and other derivatives prices. To mitigate that, it has taken a price hike, reduced grammage and scaled back various trade schemes.
* HI (one-third revenue contribution) affected by unfavorable weather conditions, including a delayed winter in North India and cyclones in South India.
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