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FY27 guidance intact; all eyes on execution

* Godrej Consumer Products (GCPL) held a business update call, where new CEO Mr. Aasif Malbari outlined the company’s roadmap for its next phase of growth. Management acknowledged that while GCPL has strengthened its financials, simplified operations, and laid the foundation for portfolio transformation, its growth achievements remained below aspirations. The strategy, therefore, is focused on reviving the core through sharper innovation and execution, accelerating portfolio transformation across India and international markets, rebuilding profitability, and investing ahead in R&D, GTM, and digital capabilities. Importantly, management reiterated its FY27 growth guidance despite a planned correction in India channel inventory. GCPL outlined a mid-term ambition of mid-teens revenue and profit growth, with sustained profit growth being the key measure of becoming a structural outperformer.

* Growth performance over the past five years has been below aspirations. Organic UVG stood at ~4% for both India and the consolidated business, with organic sales growth of ~7%/6% and EBITDA growth of ~6%. The key structural weakness has been flattish revenue growth in core categories alongside profitability pressure. Management, however, believes GCPL is materially stronger today, with a simplified operating structure, stronger balance sheet and capital allocation framework, and multiple growth pilots in place. Hence, there is no change in strategic direction; the focus is now on execution. GCPL will retain its broad strategy while increasing resources to areas where it has a clear right to win, with execution driven through granular country-, category- and market-level action plans.

* FY27 guidance retained despite near-term investment and channel headwinds: GCPL has maintained its guidance of high-single-digit standalone UVG and double-digit consolidated revenue and EBITDA growth. Near-term profitability will likely absorb the India channel inventory correction of ~INR1.25-1.5b over the next three quarters, along with frontloaded investments of ~INR2b over the next 12 months across R&D, GTM, and digital capabilities.

* GCPL has guided for mid-teens consolidated revenue and PAT growth in the medium term. While its guidance is encouraging, consistency in performance and achievements of initial milestones will be critical for the stock. The core portfolio remains under-indexed, while the new growth businesses offer significant scaling-up potential. We model a 13%/14% revenue/EBITDA CAGR over FY26-29E. We remain constructive on GCPL and reiterate BUY with a TP of INR1,150, based on 35x Sep’28E EPS.

FY27 guidance intact; mid-teens PAT growth in medium term

GCPL maintained its FY27 guidance of high-single-digit standalone volume growth and double-digit consolidated revenue (18% in 1QFY27) and EBITDA growth (15% in 1QFY27). Management stated that the emphasis is on better execution of the existing strategy, faster scaling of successful products, and fixing underperforming businesses rather than a strategic reset.

Core revival to drive growth ahead; new growth engines scaling up

Core revival is the immediate priority, with the first six categories contributing ~90% of revenue. GCPL aims to bring these categories to at least industry-level growth through sharper innovation and execution, while portfolio expansion provides the incremental growth required to reach double-digit growth. Innovation resources are being reoriented toward the core, supported by a ~INR1.5b R&D center that will double R&D capacity, while portfolio transformation through new categories, G-Lab, and white-space businesses continues. G-Lab, pet care, and entry into new categories remain key levers for portfolio transformation.

Category playbook: Premiumization and execution

GCPL sees significant headroom across its core categories, particularly through premiumization and sharper execution. The household insecticides (HI) category remains a structural opportunity, with penetration increasing from ~65% to ~80% and volumes compounding at ~15%. Soaps/skin cleansing offer scope for renewed share gains, while hair color presents a clear consumer-upgrade opportunity, with around two-thirds of consumers still using traditional formats. Hair care remains a large, multi-decade opportunity, while management expects corrective actions in fragrances following execution/integration issues related to the RCCL acquisition.

Investing in capabilities; near-term margins under pressure

GCPL is front-loading investments across R&D, global GTM, and digital capabilities, with total investment expected to reach ~INR2b over the next 12 months, including ~INR1.5b of R&D capex and a 2-3 year expected payback. Near-term profitability will be impacted by the India inventory correction and higher investments, although management views the pressure as largely temporary. Simplification is already 70- 80% complete, with further gains expected from technology adoption, asset utilization, and operational productivity over the next 1.5-2 years. Management indicated that major capex projects should largely conclude in FY27, with capex intensity moderating from FY28. M&A will remain selective and increasingly India-focused, with targets required to offer a clear right to win, attractive unit economics, and meaningful potential for growth acceleration. Assets offering only 10-15% growth are unlikely to meet the threshold.

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