Godrej Consumer Products (GCPL IN) - Strong Operating performance - CSEC Research

Strong Operating performance

- Consolidated sales grew by 12.8% YoY to INR 24.89bn led by strong growth in both domestic and international business. India business grew 10% led by healthy volume and price growth. International business grew 16% YoY (6% in organic constant currency terms) driven by strong performance in Africa and Latin America.

- Household insecticide (HI) segment grew by 4% YoY to INR 6.65bn; Hair colors segment grew 13% YoY to INR 1.71bn, while Godrej Expert Rich Crème, which continues to gain market share and double digit growth, led by distribution reach and household penetration in crème category. Domestic soap business grew 9% YoY to INR 3.58bn, led by mid single digit volume growth and effective price increase. Company continues to gain market share in soap segment with Godrej No 1 crosses INR 10bn and Cinthol crosses INR 5bn sales.

- Positive CC growth was witnessed across International business except Europe; In CC terms, Latin America (+19% YoY), Africa (+61% YoY) and Europe (-5% YoY). Indonesia sales were flat as adverse weather conditions and competition impacted the household insecticide sales, however CC sales (ex household insecticide) were 9% YoY.

Valuation: We are positive on the GCPL, given it has performed relatively well, despite sluggish demand scenario aided by innovation driven strategy, gaining market share across the segment and higher exposure to relatively underpenetrated household insecticides & hair colour business (accounts ~62% of domestic business). At CMP, the stock is currently trading at 41.6X and 35.4X to FY18E and FY19E consensus earnings. We value to company at 36X FY19E EPS, which is +2std dev to 10yr mean 1yr fwd P/E with a revised target price of INR 1,926 (earlier INR 1,868) and we upgrade the stock to MARKETPERFORMER rating (earlier: BUY). Risks: Adverse raw material price, adverse currency movement, and down trading by customers due to uncertainty. Predictability of earning in the International business is lower.

Shares of GODREJ CONSUMER PRODUCTS LTD. was last trading in BSE at Rs.1908.05 as compared to the previous close of Rs. 1909.2. The total number of shares traded during the day was 13521 in over 1981 trades.

The stock hit an intraday high of Rs. 1928.75 and intraday low of 1874. The net turnover during the day was Rs. 25601516.

Source : Equity Bulls

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