Nomura Upgrades Godrej Consumer’s Rating Post Recent Correction
Shares of Godrej Consumer Products Ltd. snapped a two-day losing streak after brokerage house Nomura upgraded the stock's rating and target price after it dropped around 10 percent in two months.
The broking firm had downgraded the stock to ‘Sell' in July after it ran up an over 57 percent rally in the first seven months of the year.
While we believe that business-wise nothing much has changed, the recent 10 percent correction has brought stock valuations to fair territory.Nomura Note
Making inroads in Africa has proved to be a tough task for most Indian consumer goods makers, including the likes of Marico Ltd., Dabur Ltd. etc, except maybe for Godrej Consumer, said the brokering firm.
Since the financial year 2014-15, Godrej Consumer's revenue from the region has advanced 1.7 times, with earnings before interest and taxes increasing 320 basis points, Nomura said.
On the flipside, macroeconomic challenges in Indonesia, Latin America, and Europe could weigh on the company's shares in the near-term, the broking firm said in a note to clients.
Nomura's Estimates:
- Earnings per share to grow by 16.9 percent
- Revenue to grow around 11 percent year-on-year
- India to record 12 percent revenue expansion, with Africa amassing 20 percent growth
- Revenue growth in Indonesia to remain flat, while Europe business growth by 5 percent
- Earnings before interest, tax, depreciation and amortisation to remain flat
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