Motilal Oswal’s research report on Godrej Consumer
The Indonesia business has been seeing gradual recovery in demand post the second COVID wave despite a tough macroeconomic situation. Given the recent bold economic reforms implemented by the Indonesian government, Mr Chandra is confident GCPL has the building blocks in place to capitalize on these reforms and deliver double-digit profitable growth over the medium term. The management aims to drive growth in its largest segment, Household Insecticides (HI), through democratization and premiumization. Furthermore, it would do so by gradually occupying whitespaces within the category by migrating consumers to aerosols and electrical products, wherein it has a stronger presence. Hygiene now accounts for 10% of GCPL Indonesia’s sales – fairly impressive given GCPL Indonesia’s recent entry into the segment. The management is now leveraging its Saniter brand and moving into personal care categories, such as soaps and personal wash with powder-to-liquid and liquid formats.
GCPL. This comes along with a) better capital allocation efforts in recent years, b) the appointment of a new head in the – erstwhile, significantly underperforming – GAUM business (largely Africa), with good initial results in the first year of his tenure in FY21, and c) potential tailwinds in domestic soap and personal wash products – led by more frequent usage since COVID-19 – and a sharp increase in domestic penetration levels in the Hand Wash category. Maintain BUY, with TP of INR1,250/share (45x Dec’23E EPS).
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