Motilal Oswal's research report on Godrej Consumer
Godrej Consumer (GCPL)’s consolidated revenue and gross profit was in line, while EBITDA was marginally higher than our estimates. The company delivered a strong volume growth of ~13% YoY in the India branded business. Importantly, EBITDA grew ~32% YoY despite a ~21% YoY rise in consolidated ad-spends. Outlook on the margin is getting better, led by decreasing input costs and cost-saving initiatives. The management also reiterated its strategy, wherein it would concentrate on category development activities, simplification of business, and focus on people & planet along with profitability. Healthy pace of earnings (mid-20’s CAGR on EBITDA and PAT over FY23- FY25E) is likely to be led by: a) superior growth in highly profitable markets, such as India and Indonesia; b) focus on profitability in Africa; and c) continuing working capital improvement in the overseas business.
Outlook
We reiterate our BUY rating with a TP of INR1,130 (based on SoTP valuation: 55x domestic business, 25x Indonesia business, 15x GAUM, other business and RCCL).
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