Maintain ADD on Godrej Consumers - In-line revenue; international margin shines - HDFC Securities
Posted On:
2021-02-15 01:38:10
(Time Zone: Arizona, USA)
Mr. Varun Lohchab, Head Institutional Research, HDFC Securities & Mr. Naveen Trivedi, Institutional Research Analyst, HDFC Securities
GCPL's 3QFY21 was a mixed bag with in-line revenue but a marginal miss in EBITDA. Domestic revenue/EBIT grew by 11/5% YoY, while International revenue/EBIT grew by 11/21% YoY. Domestic volume growth was at 7%, with strong market share gains, specifically in soaps. Recovery in discretionary demand drove the growth in Hair Colours while an increased focus on cleanliness aided soaps. HI was dragged by a weak performance in the burning format, although aerosol, electric and non-mosquito portfolio posted strong growth. GCPL continued to improve its performance in GUAM (17% cc growth) and LATAM & SAARC (35% cc growth). GUAM and LATAM led the international margin expansion. The company is focusing on expanding the addressable market for the India business along with improving performance in ex-Indonesia geographies. We marginally increase our EPS estimate for FY22 while maintaining it for FY23. We value GCPL at 38x P/E on Mar-23E EPS to derive a target price of Rs 786. Maintain ADD.