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GCPL’s 1QFY25 earnings print was mixed bag – revenue growth was below expectations though operating performance was largely inline. Topline declined for the first time in sixteen quarters –due to weakness in International revenue (Africa business declined by 25% due to shipping crisis affecting South Africa, destocking in Nigeria and depreciating Naira). On the positive side, India organic volume growth (8%) was healthy despite cutting trade schemes on Soaps and an unusually hot summer for HI. Overall operating profits were largely inline led by strong GPM expansion and impressive costs management especially in the International business (margin expansion seen across geographies). Going ahead, focus remains on driving volume-led growth (expects high-single-digit volume growth); pricing should turn positive which along with steady International profitability will aid overall earnings growth. Foray into Pet Care (targeting entry by late FY26) provides a new growth opportunity for the company. Going ahead, uptick in HI (led by recent new launches), Soaps and recovery in Africa sales will be key monitorables for further rerating. The benefit of execution machinery put in place was seen in its FY24 performance; hence, confidence level on CEO’s plan remains high & intact. Sharp corrections should be used as opportunity to add.

* Revenue below estimate, operating profitability largely inline: GCPL’s 1QFY25 sales declined 3.1% (organic -1%) to INR 33.1bn while EBITDA and adjusted net profit both grew 12.7% to INR 7.2bn and INR 4.7bn respectively. India sales grew 6.1% (8.5% incl M&A) with underlying volume growth of 8%. International sales fell 19% on reported basis – Africa sales were down 23% (cc: -10%). While South Africa was hit by the Red Sea and shipping crisis, Nigeria suffered due to destocking by retailers on account of currency appreciation. Consol GM was up 226bps yoy to 55.6% vs JMFe: 55.2%. The business continued healthy investments in brands (10% of sales - c.2% above JMFe). However, overheads were managed well, hence operating margin expanded 307bps to 21.9% (vs JMFe 21.2%). India EBITDA grew just c.7% with margin of 25% vs 25.2% LY while International EBITDA growth was c.35% led by GPM and mix improvement.

* India’ revenue inline; International profitability surprises profitability despite weak revenues: 1) India - Home-care grew 8% yoy (on a high base) with low-single-digit volumes in HI as category was impacted by intense summer, while Fabric-care and Airfreshener reported double-digit volumes. Personal-care grew 6% yoy, despite weak operating environment. Hair Colour performance remains soft (flat volumes) due to lower wedding dates while impact of price-reversals in Soaps was restricted by driving body wash (launched Cinthol Foam Body wash). 2) Raymond business reported revenue of INR 1.53bn, was impacted due to challenges faced in urban general trade (especially the cosmetic channel). 3) Indonesia clocked CC growth of 11% yoy and UVG of 7% yoy led by Stella air freshener, HI and Shampoo Hair-colour. The management targets to sustain EBITDA margins at 25%. 4) Africa’s volume growth (-21% yoy) remains under pressure after supply chain lapses, high interest rate and down stocking by retailers in Nigerian markets (due to currency appreciation). Regardless of poor revenue growth (-25% yoy), EBITDA margins expanded by 756bps to 14.4%.

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