Godrej Consumer Products - At An Attractive Entry Point, 'Buy': Systematix

Systematix Research Report

Godrej Consumer Products Ltd. issued a quarterly business update for Q3 FY25. The company expects its standalone (India) business (60-65% of consolidated revenue) to deliver underlying volume/ value growth flattish/ mid-single digits YoY respectively (Q3 FY24: +5%/ +2% YoY). It expects India growth to be limited by soaps and home insecticides businesses (both ~33% of India sales each). In soaps, Godrej Consumer flagged steep input-cost inflation in palm oil and derivatives (+20-30% YoY); while the company has taken price hikes, grammage cuts and trade scheme cuts, it expects volumes to be impacted by lower inventory in wholesale and households.

Godrej Consumer expects volume growth to normalize over the next few months with price stabilization. In HI, Godrej Consumer flagged volume impact from delayed winters in North India and cyclone in South India. It, however, highlighted doubledigit volume growth from other businesses (air care, hair care).

Valuation: We now build FY24-27E revenue/EPS CAGR of 8%/14%. We maintain our Buy rating; we roll forward valuation to December-2026 EPS (from September-2026) and value the stock on P/E of 50 times (versus 51 times earlier), at a slight discount to its past fiveyear average multiple and to peer HUL, resulting in a lower target price of Rs 1,350 (Rs 1,380 earlier). We like Godrej Consumer’s relatively stronger performance across categories, positive outlook on medium-term growth pickup, aggressive innovation, mix improvement, distribution expansion and medium-term margin potential.

The stock has corrected by ~21% over the past six months, and is at an attractive entry point in our view.

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