Godrej Consumer Products: Q2FY22 Review-In line result; maintain Buy
Source: IRIS | 12 Nov, 2021, 04.22PM
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| Rating: NAN / 5 stars. |
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 Godrej Consumer Products (GCPL) result was in-line with our estimates. India business performance has been resilient (10%YoY revenue growth on a base of 10%). Home care and personal care grew at high single digit and double- digit rate led by market share gains in soap and hair color. Positively; GCPL has launched Goodknight Jumbo Fast Card nationally while Godrej Expert Easy 5 minute shampoo is scaling up well. In international business; South Africa performed well while other markets remained soft. Indonesia continues to underperform for 5th consecutive quarter largely due to macro-economic uncertainties.
'Gross margin contraction has been steep primarily due to inflation in palm oil. Management expects operating margin to normalize by 4QFY22. Accordingly, we have trimmed our EPS estimate by 6% in FY22E. We have introduced FY24E. We maintain our Buy rating and positive view on GCPL. Our revised TP stands at Rs 1,252 (vs previous TP of Rs 1,171) valued at 50x FY24E EPS,' said IDBI Capital Equity Research.
Key highlights and investment rationale
Domestic business resilient; international market soft
Consolidated revenue grew 9%YoY driven by 10%YoY growth in India business (on a base of 10%YoY) while international business grew 7% (on a base of 11%YoY). Revenue from home care grew 5%YoY (India business +7%YoY) while from Personal Care grew 10%YoY (India business 12%YoY). GCPL gained market share in soaps. In international market revenue from; Africa, USA & Middle East grew 15% YoY (16% CC), Latin America & SAARC decline 3% YoY (+11% CC), Indonesia remained flat YoY (-2% CC). Indonesia business continues to be impacted for 5th consecutive quarter primarily due to macro-economic headwinds.Inflation in palm oil impacts operating profit margins Gross margin contracted sharply by 616bp YoY to 50% largely due to inflation in palm oil price. However, EBITDA margin contracted only 223bp YoY to 21% due to cost savings (lower ad-spends, employee cost, other expenses). Adjusted PAT grew 5%YoY to Rs 5 billion. Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.
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