Godrej Consumer Q1 Review - Strong Volume Pickup, Robust Margins; Currency Woes Queer The Pitch: Systematix

Systematix Research Report

Godrej Consumer Products Ltd. reported Q1 FY25 consolidated results below our expectations, mainly due to low revenue (-3% YoY) which led to Ebitda/adjusted profit after tax growth of 13%/18% YoY, while strong operating margin expansion of 310 basis points YoY to 21.7% was in-line with estimates.

While consolidated revenue grew 9% YoY in constant currency (11% organic), the reported revenue decline was largely on account of severe currency depreciation across Godrej Africa, US, and Middle East, Indonesia and Latin America/SAARC regions.

India business delivered strong volume growth of 8% YoY and revenues +9% YoY (+6% organic). Fabric care and air fresheners saw strong double-digit volume growth, but low-single digit growth was seen in home insecticides (similar to Jyothy Labs’ HI sales +2% YoY) and in soaps (similar to HUL); hair colour was weak (flat volume).

While negative pricing in soaps mainly accounted for the volume value gap, Godrej Consumer expects this to normalise in Q2, and expects India growth to pick up to low-double digits by end-FY25, with positive pricing as palm oil firms up.

Indonesia volume/ constant currency revenue grew 7%/11% YoY with strong broad-based growth, but currency depreciation reduced reported sales to +3% YoY. Godrej Consumer expects similar volume growth trends in FY25. GAUM revenue declined 23% YoY (CC) mainly due to inventory destocking as part of the distribution overhaul. Godrej Consumer expects channel stock reduction to persist over one-two quarters.

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