Godrej Consumer Share Price Rises As Goldman Sachs Expects Recovery From Q4

Godrej Consumer Products Ltd.'s share price rose for a third consecutive session on Monday after Goldman Sachs said that peak of cyclical headwinds from palm oil and adverse seasonality are likely behind post third quarter. The brokerage expects a recovery starting fourth quarter.

The brokerage maintained its 'buy' call on the stock with a target of Rs 1,370.00 per share, implying upside of 25.3%.

The company saw severe short-term headwinds for the India business in the December quarter, coming out of sharp spike in palm oil prices which hurt soap margins and volumes. Adverse seasonality in home insecticides category led to a volume decline.

"Due to confluence of these factors, GCPL also put out a profit warning for 3Q which was a negative surprise," it said. "However, in our view the peak impact of these headwinds is behind GCPL, and we expect a gradual recovery in Hl growth, soaps volume growth and gross margins beginning 4QFY25," Goldman Sachs said.

The brokerage expects the FMCG company to have the strongest volume and Ebitda growth over FY25-27, driven by several initiatives which will come to fruition. Standalone Ebitda margins, according to Goldman, is expected to sequentially recover to normative levels over the next two-three quarters.

"It is important to note that for six quarters prior to 3QFY25, GCPL delivered high single digit volume growth on average, which was the strongest within our FMCG coverage," Goldman Sachs said.

Share price of Godrej Consumer Products rose as much as 1% to Rs 1,127.75 apiece, the highest level since Dec. 16. It pared gains to trade 0.6% higher at Rs 1,23.10 apiece, as of 9:20 a.m. This compares to a flat NSE Nifty 50.

The stock has fallen 3.85% in the last 12 months. Total traded volume so far in the day stood at 0.04 times its 30-day average. The relative strength index was at 46.7.

Out of 36 analysts tracking the company, 26 maintain a 'buy' rating, seven recommend a 'hold' and three suggest 'sell', according to Bloomberg data. The average 12-month consensus price target implies an upside of 24.2%.