Antique | GCPL 2QFY24 result update – 231102

Antique | GCPL 2QFY24 result update – 231102

Performance impacted by one-offs

Godrej Consumer Products’ (GCPL) 2QFY24 revenue performance was broadly in line while profitability was marginally ahead despite a step-up in investment on brands. Revenue performance was impacted due to a) Subdued performance in household insecticides (HI) and hair color, impacted by poor monsoon and Shravan month, and b) Currency devaluation in Africa business. Management’s initiatives to improve performance of Indonesia business is playing out, driving revenue growth of 14% in constant currency (CC) and margin improvement, which should continue. Organic India’s business volume grew 4% impacted by flat volume in HI and low single-digit growth in personal wash and hair color. GAUM business grew 17% CC, but currency headwinds led to a 5% decline in INR terms. Overall profitability continues to improve with receding input cost inflation and cost savings, part of which has been invested in brands (A&P spends up 29% YoY). GCPL’s performance should improve with the recovery in HI and Indonesia business, and scaling up of the Raymond business. Factoring 2QFY24 performance, we have cut our estimates by ~4% for FY24/ 25 and roll forward our target price to 1HFY26. We maintain BUY recommendation with a revised target price of INR 1,194 based on 45x PER on 1HFY26E EPS.

Investment Summary

Post 2QFY24 performance, we have cut our earnings estimates by ~4% for FY24-25E and introduce FY26 estimates. Going ahead, GCPL’s performance is expected to improve with recovery in HI (revamping marketing strategy, improving efficacy, launching affordable packs) and Indonesia (inventory correction and increasing brand investment). We expect GCPL to deliver sales/ earnings CAGR of 11%/ 18% with margin expansion of 330 bps over FY23-26E. We maintain BUY recommendation with a revised target price of INR 1,194 (previously INR 1,173) based on 45x PER on 1HFY26E EPS.