Godrej Consumer Products Q1 Results Review - Sales Inline; Robust Performance In India Business: Motilal Oswal

Motilal Oswal Report

Godrej Consumer Products Ltd.’s consolidated revenue and operating profit were in line with estimates, whereas adjusted profit after tax missed our estimate by 14.7%, affected by the currency depreciation in Nigeria. Reported net profit declined 7.6% YoY due to a stamp duty payment on the acquisition of the Raymond business.

Godrej Consumer's gross profit margin expanded by 710 basis points YoY/80 bp QoQ to 53.7%. Notably, Ebitda margin improved 280 bp YoY despite a 59% rise in consolidated ad-spends.

The Raymond Consumer Care Ltd. business incurred an operating loss due to reducing inventory levels from 80-90 days to 10 days. However, the management aims to achieve equivalent profitability to the organic business.

A healthy pace of earnings growth (Ebitda/profit after tax compound annual growth rates in mid-20s over FY23-FY25E) is likely to be led by:

1. superior growth in highly profitable markets such as India and Indonesia;

2. volume growth; and

3. continuing capacity enhancement by capex in the organic portfolio.

We reiterate our 'Buy' rating with a target price of Rs 1,200 (based on 45 times FY25 earnings per share).

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