Godrej Consumer Products Ltd. share price target

We recently upgraded GCPL to BUY from Reduce, as we see that most headwinds are in the base. GCPL has capability of recovering business, given prudent execution.

• For Q3FY25, the revenue increased 3.0% YoY (+2.8% QoQ) to INR 37,684 Mn, in line with our estimate.
• EBITDA decreased by 16.4% YoY (+0.8% QoQ) to INR 7,559 Mn, missing our estimate mainly due to higher-than-expected operating expenses.

Godrej Consumer (GCPL) reported a 3% YoY increase in consolidated net revenue to INR37.7b (est. INR37.5b). Constant currency organic revenue growth was at 2% YoY.

GCPL has been a play on execution for a couple of years now. Our downgrade (to Reduce) after the Q3 business update factored in concerns on slowdown in/waning of execution.

GCPL’s Q3FY25 performance was weak as domestic business posted muted 3.6% y-o-y revenue growth (flat volume growth) and a sharp 672 bps y-o-y decline in OPM, which dragged PAT down by 27.7% y-o-y. Multiple headwinds such as a slowdown in urban consumption, surge in palm oil prices and poor season for household insecticides affected domestic performance in Q3.

Extreme weather patterns impacted sales of Household Insecticides. Soap volumes were soft on destocking due to price rises

Godrej Consumer Products’ Q3 business update highlighted temporary headwinds. Flat Q3 volumes (vs. average ~7% y/y organic growth in H1 FY25 and in the last six quarters) are expected due to challenges in soaps and home insecticides (HI), which account for nearly two-thirds of domestic revenue.

Godrej Consumer Products (GCPL) pointed to a weak Q3FY2025 in its pre-quarter business update affected by flat sales volumes and a margin dip in the India business. Domestic sales volumes growth would be flat (vs. average 7% volume growth in last six quarters) owing to lower soap sales and HI sales volumes (that contribute ~67% to India business).

For Q2FY25, the revenue increased 1.8% YoY (+10.0% QoQ) to INR 36,663 Mn, missed our estimate by 3.3%.
EBITDA increased 5.3% YoY (+4.9% QoQ) to INR 7,617 Mn, in line with our estimate 0.1%.

With 2% y/y consolidated revenue growth (vs. the Street’s estimated 1%) and Rs7.6bn EBITDA (Rs7.5bn), Godrej Consumer’s Q2 was broadly in line with expectations.

Compared to Bloomberg consensus, sales were 1% higher but EBITDA beat was 4% as margins came in 60bps above expectations

Godrej Consumer Products Limited’s (GCPL’s) Q2FY2025 performance was in line with expectations with revenue rising ~2% y-o-y (high single-digit domestic volume growth), OPM rising by 70 bps y-o-y to 20.8% and adjusted PAT growing by 12% y-o-y.

Godrej Consumer Products (GCPL) has adopted a growth-oriented strategy that includes pursuing acquisitions, cross-selling, entering new categories, and expanding the Total Addressable Market (TAM) for existing products.

For Q1FY25, GCPL reported revenue of INR 33,316 Mn (-3.4% YoY, -1.6% QoQ), missed our estimates by 4.2%.
Q1FY25 EBITDA of INR 7,262 Mn (+6.5% YoY,-4.5% QoQ), missed our estimates by 4.4%. EBITDA margin was at 21.8%, expanded by 203 bps YoY/ (-66 bps QoQ).

GCPL missed on sales and EBITDA but business is commoditised and volume growth was in line with high single digits guidance

Godrej Consumer Products Limited’s (GCPL’s) Q1FY2025 numbers were below our expectation as currency depreciation hit consolidated sales growth. Revenues decreased by 3% y-o-y; OPM expanded by 203 bps to 21.8%; PAT grew by 14% y-o-y.

IIP: IIP growth eases in Mar'24. SBIN: Continued strong performance across segment. GCPL: Strong volume-led growth across markets. POLYCAB: Strong quarter, strong outlook. ORIENTEL: Strong revenue; profitability falters

GCPL reported revenue of INR 33,856 Mn (+5.8% YoY, -7.5% QoQ) for Q4FY24, which was in line with our estimates. The YoY sales growth was driven by 12% underlying volume growth.