Buy Godrej Consumer Products Ltd For Target Rs.1,150 - Motilal Oswal Financial Services
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Sales growth in mid-single digit; healthy operating margin expansion
Godrej Consumer Products (GCPL) released its pre-quarterly update for 2QFY24. Here are the key takeaways:
India business
* Demand trends weak during the quarter.
* Organic business reported mid-single digit volume growth.
* Home Care witnessed mid-single digit volume growth, whereas personal care reported low-single digit volume growth.
Indonesia business:
* The Indonesia business may report double-digit growth in volume and value
GAUM (Godrej Africa, the US, and the Middle East) business:
* It is expected to register mid-teens sales growth on constant currency basis.
* In INR terms, sales declined in mid-single digit due to adverse currency translation impact.
Consolidated level:
*Organic business sales are expected to grow in low single digits YoY in INR terms and in double digits in constant currency terms.
* Sales growth, including inorganic, is expected to be in mid-single digits in INR terms.
* EBITDA margin may show healthy expansion YoY, along with higher category development investments.
Raymond Acquisition
* Performance of Park Avenue and Kama Sutra improved sequentially and on track to achieve full-year guidance.
Valuation and view
Along with investments in the grooming category and ongoing category development, the management focuses on boosting growth in the high-margin, high-RoCE domestic business. Hence, GCPL’s medium to long term earnings growth outlook is strong. Reiterate BUY with a TP of INR1,150.
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SEBI Registration number is INH000000412
