Godrej Consumer Q2 Update: FMCG Major Expects Mid-Single Digit Revenue Growth
The GST transition is expected to have a short-term impact on profitability, which will lead to decline in Ebitda.
Godrej Consumer Products Ltd., while disclosing its second-quarter business update in an exchange filing, projected mid-single digit revenue growth in rupee terms on a consolidated level.
This comes after the government in September announced cuts in Goods and Service Tax, that will benefit nearly one-third of Godrej Consumer's portfolio including soaps, talcum powders, shampoos and shaving creams. However, the GST transition is expected to have a short-term impact on profitability, which will lead to decline in operating income, or earnings before interest, taxes, depreciation, and amortisation (Ebitda) for the second quarter.
"Despite this temporary adjustment, we remain confident of our plans and are positive of the likely performance in the second half of the financial year," the company said in its exchange filing.
The company also said that the GST rate reductions have resulted in some short-term adjustments across the trade channels as distributors and retailers are focused on liquidating existing inventories. This has led to a delay in flow of new orders and temporarily deferred consumer purchases. This will impact the growth and profitability of the company.
The projection of a mid-single digit growth in standalone business is supported by underlying volume growth or UVG, underscoring the company's improving performance trajectory and strong fundamentals across geographies.
The fast moving consumer goods major expects high-single digit value growth in its Home Care segment which continues to demonstrate strong momentum. This segment remains a key driver for Godrej Consumer Products, reinforcing its competitive position in the market.
On the other hand, the Personal Care segment is likely to see a low-single digit decline largely influenced by the soaps category. According to the company this is a transitory adjustment and Godrej Consumer is confident in the long-term benefits of the reforms.
Regionally, the Indonesia business continues to face intense competitive pricing pressure, leading to an expected low-single digit decline for the quarter. In contrast, the Godrej Africa, USA, and Middle East segment continues its strong momentum, with double-digit value and volume growth anticipated for the second straight quarter. Profitability in Godrej Africa, USA, and Middle East remains robust.
Godrej Consumer Share Price
The business update was shared after market hours. The stock settled 0.45% higher at Rs 1,152.80 apiece on the NSE, compared to a 0.12% advance in the benchmark Nifty 50. The shares earlier during the day rose as much as 1.18% to Rs 1,161.10 per share.
Godrej Consumer's shares have fallen 13.48% in the last 12 months and risen 6.54% year-to-date.
Out of 38 analysts tracking the company, 31 maintains a 'buy' rating, five recommend a 'hold' and two suggests 'sell', according to Bloomberg data. The average 12-month consensus price target of Rs 1,365.28 implies an upside of 18.4%.
