Shares of plunged as much as 7 per cent in Thursday’s trade after the company posted a muted update for the September 2022 quarter.
The update provided an overall summary of the operating performance and demand trends for the quarter ended September 30, 2022. The company will announce its earnings for the given quarter later.
“The Indian FMCG industry continued to remain soft during the quarter. Rural markets witnessed slower growth compared to urban,” the company said in an exchange filing. It continues to remain competitive, it added.
“However, with the moderation in inflationary pressures due to correction in commodity prices, and the monsoon largely being on track (apart from a few states), we expect consumption to improve in the second half of the year,” it added.
Following the announcement, shares of Godrej Consumer Products plunged about 7 per cent to Rs 837 on Thursday, before recovering to Rs 850 at 10:45 am. The scrip settled at Rs 896 on Tuesday.
“We expect a mid-single-digit volume drop, with a low single-digit 3-year volume CAGR. Personal Care sustained its strong double-digit growth trajectory, while Home Care witnessed close to mid-single-digit growth,” the company said.
In value terms, GCPL expects to deliver high single-digit sales growth, according to the update for the given quarter. While in Indonesia, a key market for GCPL after India, it expects early double-digit constant currency sales decline.
However, with a significant correction in the prices of commodities like palm oil derivatives and crude oil, GCPL expects a recovery in consumption, gross margins expansion and upfront marketing investments in the upcoming quarters.
“In Godrej Africa, USA, and Middle East (GAUM), we continue our growth momentum across key countries. We expect to deliver constant currency sales growth in the low-teens. We are expecting constant currency sales growth in upwards of the thirties in our Latin America business,” as per the quarterly update.
Citigroup maintained a buy rating on Godrej Consumer Products with a target price of Rs 1050. “The company is deploying new strategies for market development. However, subdued demand trends and inflation is likely to impact profitability,” the brokerage said.
In the domestic FMCG market, GCPL’s key brands include Good Knight, Hit, Cinthol and Protekt. It has a presence in segments such as Household Insecticides, Hair Colour, Air Care, Fabric Care and Personal Wash and Hygiene.
Domestic brokerage firm
is also positive on the Godrej Group company with a target price of Rs 1,178 on the counter, signaling a more than 40 per cent upside in the counter.
They have a strong presence in three emerging markets such as Asia, Africa, and Latin America and serve nearly 1.2 billion consumers, said the brokerage.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
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