Godrej Consumer Products Q2 Results Review - Higher Commodity Cost A Dampener On Margin Front: Dolat Capital

Dolat Capital Report

Godrej Consumer Products Ltd.’s Q2 FY25 revenue missed our estimate, while Ebitda and adjusted profit after tax were in line. The company reported 7.0% volume growth in India business. However, high inflation in palm oil prices resulted in lower growth in personal care revenue and profitability.

Home care reported 12% sales growth driven by double-digit growth in air fresheners and fabric care. Furthermore, household insecticide volumes grew in the mid-single digits. However, personal care posted a mere 3% revenue growth during the quarter.

Though Q2 profitability was in line with the estimate, we have downward revised our FY25/26E EPS estimates by 8.7/9.1% at Rs 21.7/24.6 to factor in increase in palm oil prices and the anticipated decrease in personal care products demand.

Further, we have introduced FY27E earnings per share at Rs 27.1. Valuing the stock at 46 times FY27E EPS we arrive at a target price of Rs 1,247. Considering rich valuation and anticipated margin pressure, we maintain our ‘Sell’ rating.

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