Buy Godrej Consumer Products With A Target Price of Rs 1,252 Suggests IDBI Capital

IDBI Capital, a brokerage firm, has recommended buying the stock of Godrej Consumer Products Limited with a target price of Rs 1,252. The stock is currently trading at a market price of Rs 936 and the brokerage estimates a potential upside of +31% for the stock from the current market level. According to the brokerage, the companys Consolidated revenue grew 9%YoY driven by 10%YoY growth in India business (on a base of 10%YoY) while the international business grew 7% (on a base of 11%YoY). Revenue from home care grew 5%YoY (India business +7%YoY) while from Personal Care grew 10%YoY (India business 12%YoY). GCPL gained market share in soaps. In international market revenue from; Africa, USA & Middle East grew 15% YoY (16% CC), Latin America & SAARC decline 3% YoY (+11% CC), Indonesia remained flat YoY (-2% CC). The brokerage has claimed that the companys Gross margin contracted sharply by 616bp YoY to 50% largely due to inflation in palm oil price. However, EBITDA margin contracted only 223bp YoY to 21% due to cost savings (lower ad-spends, employee cost, other expenses). Adjusted PAT grew 5%YoY to Rs 5bn.Advertisement IDBI Capital has reported that Godrej Consumer Products (GCPL) result was in-line with our estimates. India business performance has been resilient (10%YoY revenue growth on a base of 10%). Home care and personal care grew at a high single digit and double digit rate led by market share gains in soap and hair color. Positively; GCPL has launched Goodknight Jumbo Fast Card nationally while Godrej Expert Easy 5 minute shampoo is scaling up well. In its research report, IDBI Capital has reported that In international business; South Africa performed well while other markets remained soft. Indonesia continues to underperform for 5th consecutive quarter largely due to macroeconomic uncertainties. Gross margin contraction has been steep primarily due to inflation in palm oil. Management expects the operating margin to normalize by 4QFY22. Accordingly, we have trimmed our EPS estimate by 6% in FY22E. We have introduced FY24E. We maintain our BUY rating and positive view on GCPL. Our revised TP stands at Rs 1,252 (vs previous TP of Rs 1,171) valued at 50x FY24E EPS. The stock is picked from the brokerage report of IDBI Capital. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.