Buy Godrej Consumer Products; target of Rs 1150: ICICI Securities

Moneycontrol • 2 days ago

Original source

Key Investment Pillars

  • Volume-led growth: Godrej Consumer's consolidated revenue grew 19% YoY, driven by an 8% underlying volume growth, with Home Care and Personal Care contributing to the growth.
  • Improving product mix: The company's focus on premium products and new launches, such as Godrej Spic and Godrej Rizz, is expected to drive growth and margin expansion.
  • Margin recovery: Although gross margin contracted due to inflation, the company aims to sustain Q2's EBITDA growth trend in India, with a focus on pricing for absolute EBITDA growth.
  • International business: Indonesia and Africa, USA, and the Middle East segments showed strong growth, with revenue increasing 20.1% YoY and 40.3% YoY, respectively.

Thesis Validation Checklist

To validate the investment thesis, investors should watch for: sustained volume growth, improvement in gross margin, successful integration of new launches, and steady performance of the international business. Key signals to monitor include: UVG growth, EBITDA margin expansion, and the company's ability to navigate inflationary pressures. Risks to the thesis include structural deceleration in India household insecticides, limited success with new product launches, and a rise in competitive intensity.