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Steady topline: Godrej Consumer posted Q2FY24 revenue at Rs 3,602cr which grew by 6.2%/4.4% YoY/QoQ. Overall its volume grew in double digits by 10% and organic volume growth was at 6% YoY while growth in constant currency stood at 16% YoY. Amongst businesses, India business grew by 9.2%/8.1% YoY/QoQ to Rs 2,168cr with an underlying volume growth of 11% YoY and organic volume growth of 4% YoY. Organic volume growth could have been better than the posted number but it was impacted due to lower single digit growth in the personal care segment. Amongst international geographies, India, Indonesia, Latin America & SAARC region performed well while Africa, USA & Middle East region remain impacted.

Robust improvement on margins: Godrej’s gross profit for Q2FY24 was at Rs 1,977cr, up by 21.8%/6.7% YoY/QoQ and strong improvement in margin to 54.9% by 702bps YoY and 115bps QoQ led by decline in raw material cost. Despite higher spends on advertisement, EBITDA too witnessed healthy improvement led by efficiencies and and so it grew by 29.9%/9.5% YoY/QoQ to Rs 704cr while margin was at 19.5%, an increase of 357bps/91bps YoY/QoQ. PAT stood at Rs 433cr, up by 20.6%/35.7% YoY/ QoQ with improvement in margin by 144bps/277bps YoY/QoQ to 12%.

Decent growth in India business but organic volume growth could be better: GCPL’s India business (~59-60% of revenue) overall volume grew by 11% YoY while organic volume grew by just 4% because of lower growth in the personal care segment. Its revenue grew by 9.2%/8.1% YoY/QoQ to Rs 2,168cr. Further, the India business growth was led by the Home Care segment while Personal Care segment growth was mixed. Home care volume grew in mid-single digit and revenue increased by 5.1%/21.4% YoY/QoQ to Rs 913cr led by Air freshner & non-mosquito portfolio while household insecticides growth was flat due to erratic monsoon season. Personal care volume came in lower single digit as hair colour growth remained impacted and personal wash delivered low-single digit growth while Magic hand wash continues to grow in double digit.

Concall highlights: 1) Management remains positive on the growth prospect of the company and plan is to drive volume led growth. 2) Raymonds Brands, Park Avenue and KamaSutra witnessed a sharp improvement sequentially and clocked in sales of Rs 142cr. 3) The integration of Raymonds brand is almost completed and have scaled up advertisements and integrated distribution network which will aid in saving of ~400-500bps on distributor margins. 4) There was change in the organization team wherein Mr Vishal Kedia who currently heads strategy team will also lead the investor team in place of Mr Tapan Joshi. 5) The Board of Directors have declared an interim dividend of Rs 5/share and their plan is to maintain steady stream of dividend.

Valuation: GCPL continues to deliver yet another quarter of decent performance in-line with our expectation. Management strategy would be to drive volume led growth with emphasis on investing in brands, gaining market share by expanding distribution reach and spending more on media & advertisements. Also, their plan is to focus on margin improvement which would be driven by cost efficiency measures and further easing of raw material prices. Consequently, we expect revenue/EBITDA to grow at 15%/20% CAGR over FY23-25E and have maintain a Buy rating with a target price of Rs 1,191.

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