Godrej Consumer Products Ltd. share price target

Robust volume-led growth aided 12% YoY rise in India revenue; Indonesia business saw strong recovery

Continued thrust on category development (witnessing early signs of success), simplification of international business (w.r.t SKUs, distribution, company structure), focus on integrating technology in decision making (for media investments, demand and financial forecasting) and cost savings (+150bps saving in FY23) were the key markers in GCPL’s analyst meet.

We like the strong volume-led revenue growth in all key segments. Volume growth (India branded business) has been one of the highest (at 5% 4Y volume CAGR) compared to peers (2% DABUR, 3% HUL, 6% MARICO). Revenue performance (YoY) in Household Insecticide business has been stronger (vs 3QFY23).

The consensus believes that GCPL’s acquisition of Raymond’s FMCG business
(predominantly deodorants and condoms) is negative (stock declined ~10% from peak). We reckon it’s a classic case of fundamentals vs. narrative.

We reiterate GCPL is a long gestation turnaround story. Measures of reducing complexity (reducing working capital and distributor model in Indonesia) and category development (launched two access packs in LV and aerosol format in HI) are steps in the right direction, however, take time in yielding results (some part of consensus was expecting a quick turnaround).

Q3 sales grew 9% INR and 15% CC YoY; underlying volume growth stood at 1%