Motilal Oswal recommended neutral rating on Godrej Consumer with a target price of Rs 665 in its research report dated August 04, 2020.
Motilal Oswal 's research report on Godrej Consumer
Godrej Consumer's (GCPL) 1QFY21 earnings were in line. Household Insecticides (HI) sales were better than expectations. However, Soaps disappointed with 2% YoY sales decline, despite a favorable environment. Gross margins were below expectations due to an adverse mix. A sharp 46% YoY cut in ad-spends meant that EBITDA was slightly ahead of expectations. We do not see any visibility for the single-digit EPS trajectory of the past 5 years to change materially any time soon. RoCE at less than 20% is also much lower than peers and is unlikely to improve materially over the next few years. Thus, valuation of 40.5x FY22E seems fair. Maintain Neutral.
Outlook
Consequently, we maintain our Neutral rating with TP of INR665 (38x Jun'22E EPS).
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