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Godrej Consumer Products 3QFY2014 performance highlights and results update

February 6, 2014, Thursday, 06:12 GMT | 01:12 EST | 10:42 IST | 13:12 SGT
Contributed by Angel Broking

For 3QFY2014 Godrej Consumer Products (GCPL) posted a lower-thanestimated 17% yoy growth in top-line, impacted by poor off-take in the Household Insecticides (HI) business in India. This was mainly due to weak demand in the southern and eastern states on account of poor monsoons.
Key highlights of the quarter: GCPL’s India and international businesses posted a revenue growth of 13% yoy and 22% yoy respectively. On the domestic front HI, Soaps and Hair colors businesses posted a revenue growth of 8% yoy, 6% yoy and 37% yoy respectively. The Management indicated that the performance of the HI business remained strong except in a few states. The Soaps business posted a growth despite category de-growth in both volume and value terms. The company hiked prices of soaps to pass on the increase in palm oil prices. The strong growth in the Hair colors segment was led by Godrej Expert Rich Hair crème, despite the anniversarisation of its launch. Growth on the international front was lead by the Africa business, which posted a growth of 29% yoy (constant currency growth of 21%). The Indonesian and Latin American (LATAM) businesses posted a growth of 6% and 10% respectively. The company’s OPM fell by 107bp yoy to 15.5%; impacted by divestment of the foods business, increase in fuel costs (~33%), wage hikes (~60%) in Indonesia, and also due to a high base for Africa operations. Consequently the bottom-line rose by 13.4% yoy to Rs.195cr.
Outlook and valuation: Going ahead we expect GCPL’s consolidated top-line and bottom-line to grow at a CAGR of 18.4% and 15.5% over FY2013-15E. At the current market price, the stock is trading at 25.6x FY2015E consolidated earnings. We maintain our Neutral rating on the stock.