Godrej Consumer shares snap 3-day gain; fall 4.5% post Q1

Shares of Godrej Consumer Products declined over 4% in early trade on Thursday after the fast-moving consumer goods company reported lower than expected earnings in the first quarter ended June 30, 2024. Post Q1, most brokerages retained ‘Buy’ calls on the Godrej Group stock, giving the target price in the range of ₹1,580-1,715 per share.  

Snapping three sessions gaining streak, Godrej Consumer Products (GCPL) shares declined as much as 4.5% to ₹1,433 on the BSE. The counter witnessed strong volume as 2.2 lakh shares changed hands over the counter versus a two-week average of 0.88 lakh stocks, while the market capitalisation slipped to ₹1.48 lakh crore.  

Early today, shares of Godrej Consumer opened higher at ₹1,509.85, up 0.5% against the previous closing price of ₹1,501.10 on the BSE. In the last three sessions, the FMCG heavyweight rose nearly 3%.

The stock price of GCPL touched its 52-week high of ₹1,524.70 on July 23, 2024, and a 52-week low of ₹959.55 on October 26, 2023. The stock has delivered 43.5% returns in the last one year; 19% in six months; and 26.6% in the calendar year 2024. In the past one month, the counter has risen nearly 2% amid profit booking at higher levels.

For Q1 FY25, Godrej Consumer Products posted a 41% jump in its consolidated net profit at ₹450.69 crore as compared to ₹319 crore in the same quarter last year. The revenue from operations, however, dropped 3.4% to ₹3,331.58 crore from ₹3,449 crore in the year-ago quarter. It also declared an interim dividend of ₹5 per share of ₹1 face value, with the record date set at August 16.

Post Q1, JM Financial has maintained ‘Buy’ call on the FMCG stock, with a 12-month target price of ₹1,580. “Sharp corrections should be used as opportunity to add,” it says in a note.

The brokerage says that GCPL’s Q1 FY25 earnings print was mixed bag as revenue growth was below expectations but operating performance was largely inline. “Topline declined for the first time in sixteen quarters –due to weakness in International revenue (Africa business declined by 25% due to shipping crisis affecting South Africa, destocking in Nigeria and depreciating Naira). On the positive side, India organic volume growth (8%) was healthy despite cutting trade schemes on Soaps and an unusually hot summer for H1.”

Motilal Oswal has also maintained a ‘Buy’ call on the company, with a price target of ₹1,700 per share. “GCPL has seen improved sales growth in its India business in recent years. It has delivered industry-leading volume growth in the India business over 9MFY24, and it is likely to record a double-digit EPS growth over FY24-26E,” it says in a report.

The agency believes that the implementation of disruptive innovations, the introduction of access packs, expansion into new growth categories and increased advertising expenditure are anticipated to contribute to a consistently robust growth trajectory in this high-margin and high-ROCE domestic business. “The company is consistently working toward expanding total addressable market (TAM) for the India business, along with product innovation to drive frequency. Besides, there has been a consistent effort to fix the gaps in profitability/growth for its international business.”

Another domestic brokerage, Nuvama has also reiterated ‘Buy’ on the stock with a price target of ₹1,715. “We like GCPL’s approach towards working on expanding its TAM and launching disruptive products; it shall gradually rack up volumes and profitability. We are hence increasing the target valuation to 60x (from 55x),” it says in a note.

During the quarter under review, the company also announced entering the pet care business in India though a 100% owned subsidiary (Godrej Pet Care), which is likely to commence operations in H2 FY26. “Pet Care is an ₹5,000 crore category and is likely to expand at a mid-teen CAGR for the next few years,” Nuvama says in its report.

GCPL will invest ₹500 crore in this business over a period of five years. It will have a manufacturing and R&D tie-up with GAVL (a group company). The company has already appointed Nitin Jain, an industry veteran as COO. 

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