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Margin set to improve

Godrej Consumer Products Ltd (GCPL) is one of India’s leading home-grown household and personal care companies. It also has a presence in Indonesia, Africa, the United States (US) and the Middle East, among others.

* In Q3FY25, consolidated revenue increased 3.0% YoY to Rs. 3,768cr mainly owing to flat growth in underlying volume.

* Revenue from India increased 2.6% YoY to Rs. 2,262cr led by growth in the home care and personal care segments.

* The home care segment grew 4.0% YoY, driven by the strong performance of Goodknight Agarbatti, which gained significant market share in the incense sticks segment. However, lower demand for household insecticides and a slowdown in urban consumption affected premium formats.

* Personal care grew 2.0% YoY, despite personal wash volumes declining in the midto-high single digits, while hair colour volumes grew in the mid-single digits.

* EBITDA fell 16.4% YoY owing to a 7.3% YoY increase in employee benefit expenses, 6.1% YoY rise in selling, marketing and distribution expenses and 19.7% YoY growth in other expenses.

Outlook & Valuation

Though revenue growth slowed and profit margin decreased in the quarter, the incense sticks, laundry, air fresheners and sexual wellness segments performed well and the electrics segment increased market share. Indonesia and Latin America continued to perform well. Africa is expected to report positive organic revenue growth in the coming quarters. Margin in the soap segment is expected to normalise as input prices decline in the coming quarters. With rural growth outpacing urban growth, and new product launches contributing to growth, GCPL is expected to report positive organic revenue growth in the coming quarters. Therefore, we upgrade our rating to BUY from HOLD on the stock with a rolled forward target price of Rs. 1,237 using a target multiple of 45x P/E on FY27E

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