ICICI Securities upgrades Godrej Consumer to buy; optimistic on volume growth, Indonesia prospects

ICICI Securities upgraded Godrej Consumer to ‘buy’, raising the target price to Rs 1,260 from Rs 1,050 apiece. The decision is based on the belief that the brand’s fast growing categories offer the potential for double-digit volume growth. From the CMP of Rs 1,092.5, this offers an upside of 15 percent.

Godrej Consumer’s focus on market-beating underlying volume growth is driven by the firm’s development initiative across categories. The domestic brokerage noted that the volume share continues to gain in the soap segment.

Earlier this year, GCPL acquired the FMCG business of Raymond Group for a total of Rs 2,825 crore. The integration of some of Raymond’s brands, such as deodorant player Park Avenue and sexual wellness brand Kamasutra, have been largely completed, noted ICICI Securities.

As a result of Godrej Consumer’s initiatives, the growth trajectory in Indonesia has improved. The target for the company is to drive the volume growth ahead of the GDP growth.

ICICI Securities noted that the target is to build back the EBITDA margin to approximately 25 percent over the next two to three years.

Godrej Consumer Products (GCPL) reported a consolidated net profit of Rs 432.77crore for the July-September quarter, a 20.59 percent gain from the previous fiscal. Revenue grew 6.19 percent to Rs 3,601.95 crore.

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Godrej Consumer Products’ second quarter earnings have largely met expectations, showing improvement in both India performance and overseas outlook. Brokerages have maintained their “buy” calls on the stock, citing high growth through FY25.

GCPL has improved India business sales growth in recent years, delivering double-digit volume growth in 2QFY24 and is likely to deliver double-digit sales/EBITDA/PAT growth over FY23-25E, analysts at Motilal Oswal said in a note, in October.

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