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Motilal Oswal Report
We note that under Sudhir Sitapati's leadership, there has been a noticeable shift in approach at Godrej Consumer Products Ltd. over the last 12-18 months. The company, under his astute guidance, has adopted a growth-centric strategy, including pursuing inorganic growth, cross-selling, entering new categories, expanding the total addressable market for existing products, and more.
Additionally, there has been an increase in reinvestment, particularly in marketing spending, and the company has made tough decisions such as improving inventory management for RCCL & Indonesia and closing the non-core businesses.
In an environment where demand recovery is being delayed, Godrej Consumer's internal initiatives are expected to outperform those of its competitors. The inclusion of incense sticks and liquid detergent not only expands the target market but also showcases Godrej Consumer's backend competence and growth-oriented approach. Indonesia and Godrej Africa, USA, Middle East still offer enough headroom for Ebitda margin expansion in the coming years (details shared in specific sections).
With domestic business already outperforming in volume growth, improvements in demand should further lead to a better growth trajectory for Godrej Consumer. The stock is trading at 54 times and 47 times price/earning on FY25E and FY26E, respectively.
We believe earnings surprises will keep the stock in flavor. Reiterate 'Buy' with a target price of Rs 1,500.
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