Tag: Godrej Consumer Products

FMCG Q4FY24 preview: Analysts on lookout for demand recovery signals

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As the fast-moving consumer goods (FMCG) sector prepares to release its January-March 2024 quarterly results after a long period of demand weakness and ahead of the general elections, the question on analysts’ mind is whether it’s time for a recovery.

Below are the key expectations:

What stays the same?
Demand conditions continue to be similar to the last three quarters.

Operating profits for companies is expected to grow ahead of revenue. This means there could be some margin expansion.

Within the consumer space, discretionary is likely to do better than staples.

What could be different?
Three things. One, management commentary on demand visibility may have a little more optimism than the last few quarters.

This is largely because there has been a gradual improvement in rural with contained inflation.

However, there are also some growth challenges emanating from urban consumption.

The last few quarters have been about good margin expansion. But going forward, levers for margin expansion could also be limited as companies pass on price hikes and reinvesting those savings in advertising spending.

What we know so far from the business updates
From the updates released so far, Godrej Consumer reported a high single-digit organic volume growth, and a double-digit growth in consolidated business.

Dabur reported mid-single-digit revenue growth. The stock declined after its update.

Marico has returned to positive growth territory after three quarters.

How the different business segments are expected to perform:

Jewellery companies

Jewellery is one segment that is shining.

Titan grew 19% on a huge base, Kalyan Jewellers’ India business grew 38%, and Senco Gold grew 39% in the fourth quarter.

Staples companies

From the staples squad, analysts expect companies like Godrej Consumer, Tata Consumer, Jyoti Labs and Honasa to be among likely outperformers with growth rate higher than the industry.

Some others such as HUL, Britannia, Dabur, and Emami could continue to underperform.

Also Read | FMCG sector to witness subdued growth till second quarter of FY25, says Kantar report

Paints business

Paints companies are expected to see high single to low double-digit volume growth.

However, revenues will be lower than that because the prices are lower following a raw material deflation.

For the near future, the commentary on crude and competition will remain crucial.

Beverages business

Analysts expect gross margins for United Breweries to improve, whereas for Varun Beverages this quarter may be impacted by extended winter in the January to March quarter.

However, given the ongoing heatwaves, these companies could do a lot better in April to June quarter 2024.

Also Watch | Abneesh Roy, Executive Director of Nuvama Institutional Equities, talked about the FMCG industry in an interview with CNBC-TV18.

The key triggers to look at, are any election-related demand boost, prediction of normal monsoon, above normal predicted by India Meteorological Department (IMD) and stocks that have seen a lot of time correction, such as HUL and Dabur, which are at the same levels as they were pre-pandemic.

Also Read | Nielsen IQ forecasts moderate growth for India’s FMCG industry in 2024

For more details, watch the accompanying video

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Godrej Consumer Q4 Update: Strong showing abroad contrasts with subdued Indian demand

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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FMCG major Godrej Consumer Products Ltd (GCPL) on Friday (April 5) released the business update for the fourth quarter of fiscal year 2024, revealing a mixed performance across its various geographical segments.

While operating conditions in India remained subdued, the company reported robust growth in its international markets, particularly in Indonesia and the GAUM (Godrej Africa, USA, and Middle East) region.

“Operating conditions in India continue to remain subdued. Our India organic business continued to deliver strong underlying volume growth at high-single-digit with growth being broad-based across both home care and personal care,” GCPL said in a regulatory filing.

In India, GCPL’s organic business continued to exhibit strong underlying volume growth, particularly in the home care and personal care segments, registering high single-digit growth.

Also Read: Godrej Properties sells homes worth ₹2,690 crore at Kandivali project launch

Despite subdued demand for household insecticides due to an extended winter in the northern and eastern regions, the launch of GoodKnight agarbatti received positive feedback from consumers. The Park Avenue and KamaSutra brands performed in line with category seasonality, contributing to double-digit reported underlying volume growth.

Conversely, GCPL’s Indonesia business maintained its consistently strong performance, achieving double-digit volume and sales growth.

However, in the GAUM region, while the organic business delivered high-single-digit volume growth and double-digit constant currency sales growth, the devaluation of the Nigerian naira in January is expected to result in a double-digit decline in sales when denominated in INR terms.

At the consolidated level, GCP anticipates high single-digit underlying volume growth and mid-single-digit sales growth, driven largely by currency volatility. Despite increased media investments, the company’s EBITDA margin, including forex, is projected to expand year-on-year.

Furthermore, GCPL provided an update on the East Africa re-organisation, stating that the transaction was largely completed as of March 31, 2024.

Also Read: Godrej Consumer expects margins to go up because of these 3 factors

The company expects the impact on revenue to be approximately ₹70 crore in Q4, with any potential charges related to impairment testing of GAUM CGU (cash generating unit) and other one-time accounting assessments to be concluded during the same period. The re-organisation is anticipated to have a positive impact on cash flows.

Shares of Godrej Consumer Products Ltd ended at ₹1,209.70, up by ₹32.90, or 2.80%, on the BSE.

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Godrej Consumer Products Q3 Update: Park Avenue, Kama Sutra brands lead steady growth in India

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Releasing its quarterly update for the third quarter of the fiscal year 2023-24, Godrej Consumer Products Ltd on Friday (January 5) said it defied Q2 challenges in India, achieving steady mid-single-digit volume growth across home care and personal care.

The Park Avenue and KamaSutra brands excelled, poised to meet full-year targets, with reported volume growth in double digits, the fast-moving consumer goods major said in a regulatory filing.

“In India, the operating environment continues to remain similar to Q2. Despite this, our organic business delivered steady underlying volume growth of mid-single digits. Growth was broad-based across both Home Care and Personal Care. Park Avenue and KamaSutra brands continue to perform well and are on track to achieve full-year ambition,” the company stated in its release.

The Indonesia business continued its robust performance, exhibiting close to double-digit volume growth and high single-digit constant currency sales growth, it said.

Also Read: Demographics, companies and policies together make India a super exciting place: Edelweiss

However, the GAUM (Godrej Africa, USA, and Middle East) business faced challenges, experiencing a flattish to mild decline in volume growth, primarily due to trade destocking in regions slated for restructuring in Q4. Despite double-digit constant currency sales growth, the naira devaluation is expected to result in a high-single-digit sales decline, Godrej Consumer pointed out.

The LATAM (Latin America) business encountered significant headwinds as the sharp devaluation of the Argentinian peso, from 361 to 808, impacted nine months of revenue due to hyperinflation accounting.

This is projected to negatively impact consolidated sales by mid-single digits. Despite the challenging environment, the LATAM business maintained positive volume growth.

On a consolidated level (organic), Godrej Consumer Products anticipated mid-single-digit volume growth, double-digit constant currency sales growth, and low-single-digit sales decline in INR terms.

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The impact of currency fluctuations and hyperinflation in GAUM and LATAM is expected to result in reported volume growth at high-single digits, with reported sales growth remaining flattish in INR terms.

Remarkably, the company continues to drive year-on-year expansion in EBITDA (including forex) margin, demonstrating resilience in the face of global challenges and sustaining growth despite increased category development investments.

The detailed financial results, post-approval by the board of directors, will provide a more comprehensive overview of Godrej Consumer Products’ performance in the 3Q FY24, it added.

Shares of Godrej Consumer Products Ltd ended at ₹1,219.85, up by ₹17.85, or 1.49%, on the BSE.

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Godrej Consumer Products hits 52-week high after ICICI Securities upgrades stock to ‘buy’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Brokerage house ICICI Securities has upgraded its rating on Godrej Consumer Products Ltd (GCPL) to “buy”, citing potential for double-digit volume growth in the rapidly growing product categories.

The brokerage has also raised the target price of the FMCG firm to ₹1,260 from ₹1,050 per share earlier.

As per the brokerage, to achieve a market-beating UVG, the company has focused on prioritising category development initiatives and aligning strategies with emerging trends.

In its research note, ICICI Securities said that the volume share continues to gain in the soap segment.

After the upgrade by ICICI Securities, shares of Godrej Consumer Products gained nearly 2% to hit a fresh 52-week high of ₹1,114 apiece on BSE in morning trade on Wednesday.

Meanwhile, Motilal Oswal has also maintained a ‘buy’ rating on Godrej Consumer Products. The brokerage set a target of ₹1,120 per share. Motial Oswal observed that the company’s management is confident in the acquired projects.

Earlier in October, Godrej Consumer Products, which owns soap brand Godrej No 1, reduced prices of soaps by 13 to 15 percent amid palm oil and other raw materials turning relatively cheaper.

The integration of acquired brands — Park Avenue and Kamasutra — has been largely finalised.

Previously, Godrej Consumer finalised a deal with Raymond to acquire its FMCG arm Raymond Consumer Care, which operates in personal care, sexual wellness and home care categories with brands like Park Avenue, Kamasutra and KS Spark.

At 10.06am, shares of Godrej Consumer were trading 1.54% higher at ₹1,110.05 apiece on the BSE.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Godrej Consumer expects margins to go up because of these 3 factors

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Sudhir Sitapati, MD & CEO of Godrej Consumer Products, anticipates a steady increase in the firm’s operating margins over the coming years, supported by various contributing factors: the expected continuous growth in Indonesia, a reshaping of the African market following recent restructuring efforts, and the integration of the acquired Raymond Consumer Care (RCCL) business.

These elements are expected to collectively drive a steady increase in both gross and EBITDA (earnings before interest, tax, depreciation, and amortisation) margins going forward to as much as 23% from around 20% now.

Sitapati elaborated on his ambitions for Godrej Consumer Products’ growth, aiming for a steady climb in volume. He said, “We are currently positioned between 5% and 10% in terms of volume growth, and our goal is to steadily inch closer to our target, which stands at a robust 10% annual volume growth.”

Also Read | Godrej Consumer to invest Rs 515 cr for manufacturing unit in Tamil Nadu, create 400 jobs

With the festive season in full swing, Sitapati also expects a notable uptick in the company’s performance in the third quarter of the fiscal year 2023-24.

On Wednesday, November 1, the company reported its financial results for the July-September quarter in which the net profit at ₹432.8 crore fell short of the ₹463 crore profit predicted in a CNBC-TV18 poll.

Revenue rose 6% for the same quarter, while the margin surged by 360 basis points to 19.6%. One basis point is equivalent to one-hundredth of a percentage point.

The company also announced an interim dividend of ₹5 per share for the financial year 2023-24.

For more details, watch the accompanying video

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Godrej Consumer Products Q2 sees steady growth in India despite weak macros

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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FMCG major Godrej Consumer Products Ltd (GCPL) on Thursday (October 5) said despite facing challenges such as weak macroeconomic conditions and adverse weather in India, the organic business of the company delivered a steady performance with mid-single digit volume growth in the second quarter ended September 2023.

“In India, we witnessed weak macros and adverse weather conditions during the quarter. Despite the tough operating environment, our organic business delivered a steady performance with mid-single digit volume growth,” GCPL said in a regulatory filing.

In specific product segments, home care witnessed mid-single digit volume growth, while personal care achieved growth in the low-single digits. Further, the company noted sequential improvements in the performance of its Park Avenue and KamaSutra brands, indicating that they are on track to meet their full-year guidance.

Beyond Indian borders, GCPL’s business in Indonesia continued its upward trajectory, reporting double-digit volume and value growth, underscoring the company’s international expansion success.

In the Godrej Africa, USA, and Middle East (GAUM) region, the company maintained its consistent performance, with constant currency sales growth reaching the mid-teens. However, when converted to Indian rupees (INR), adverse currency translation effects are expected to lead to a mid-single-digit decline in sales.

At the consolidated level, on an organic basis, GCPL anticipates mid-single-digit volume growth and double-digit sales growth in constant currency terms. However, due to currency fluctuations, sales growth in rupee terms is projected to be in the low single digits.

The company remains committed to expanding its EBITDA (including forex) margins year-on-year across key markets, while simultaneously increasing investments in category development.

Shares of Godrej Consumer Products Ltd ended at Rs 977.90, down by Rs 12.45, or 1.26 percent, on the BSE.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Should investors worry about companies with no promoters? Here’s a reality check

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Promoter pedigree is one key criteria that investors are advised to look for before investing. But does that mean companies with no classified promoter are not worthy of investing?

Companies like ICICI Bank Ltd., Larsen & Toubro Ltd., ITC Ltd., have not had a promoter for decades and have yet created wealth for shareholders through a professionally run setup.

The recent bull run in the market has seen multiple company promoters either paring their stake or bidding a complete exit from the company too, Coforge being a case in point.

We at CNBC-TV18 have chosen six companies that do not have a classified promoter and 100 percent of the shareholding is with the public.

Some criteria we kept in mind before choosing these companies include a market capitalisation of at least Rs 10,000 crore and a trading history of no less than five years.

These six companies are – ICICI Bank, L&T, ITC, RBL Bank, Federal Bank and IEX. Lets look at the average five-year return for these companies:

RBL Bank shares took a beating between 2019-2021 as the lender suffered from corporate governance and asset quality issues. The stock is in focus since Mahindra & Mahindra acquired a stake in July. Data showed that even the Kamath Brothers-led Zerodha Broking owns a stake valued at just under Rs 180 crore in the private lender.

As the table suggests, the five companies have average returns ranging from 12-46 percent. The higher-end number is such due to shares of IEX gaining as much as 230 percent in 2021 before they corrected. If we exclude 2021, the average return of IEX for the remaining years falls to zero.

ICICI Bank is another case in point. The lender was under the scanner after allegations against its former MD & CEO Chanda Kochhar. But since the new management has taken over, shares have jumped nearly 4x from the lows.

Promoter-Led Companies

This section also includes six private companies, with a five-year trading history and at least 60 percent promoter holdings. PSUs are excluded from this list.

TCS is owned by the Tata Group, Avenue Supermarts is backed by veteran investor Radhakishan Damani, GCPL is a Godrej Group company, the promoter pedigree here does not need to be defined. But have they done as well as their professionally run peers?

Here’s a look at their five-year returns:

As the table shows, the five-year average return of these promoter-run companies range between 5-25 percent, nearly the same as ones that do not have a promoter. Specific companies have their own factors in this list as well.

Shares of Vedanta have surged only in two out of the last five years and are down nearly 22 percent this year too. Although the stock has generously rewarded investors in terms of dividend, the impending debt repayments and promoter pledges continue to remain an overhang.

V Jayasankar, MD & Member of Board at Kotak Investment Banking told CNBC-TV18 in an interaction on August 22 that not all promoter sales should be viewed in negative light. “I think it’s all driven by either a PE investor wanting an exit over a three to five year period, which is fair, because the normal period for a PE investor is three to five years and if the markets are at its robustness, why not,” he said.

“I think it’s very likely that you’ll see more of these transactions. So I think you should take it as a trend. And when the markets are robust, that’s the right time for any block sell,” Jayasankar added.

At the end of the day, shareholders will reward those companies that deliver performance-wise – promoters, or no promoters.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Godrej Consumer to invest Rs 515 cr for manufacturing unit in Tamil Nadu, create 400 jobs

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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FMCG major Godrej Consumer Products Limited (GCPL) has signed a Memorandum of Understanding (MoU) with the Tamil Nadu government. As a part of this MoU, GCPL will establish a state-of-the-art manufacturing facility in the state, making an investment of Rs 515 crore over the next five years, the company said in a filing on Thursday.

Shares of GCPL recovered over 1 percent to hit an intra-day high of Rs 1,032 from days’ low of Rs 1,019.75. Godrej Consumer shares have gained 15 percent so far this year, while it has risen 20 percent in the last one-year period.

Recently, Godrej Consumer Products said it has earmarked a capex of Rs 900 crore, which will be used for setting up new manufacturing units in Tamil Nadu and Madhya Pradesh.

The manufacturing sites are expected to come on stream approximately in 18-36 months and the projects will be funded through a mix of internal accruals and debt.

The FMCG major said that it will create more than 400 job opportunities in Tamil Nadu with this investment. “This facility aims to have an inclusive and gender balanced workforce. Our plan is to employ 50 percent of women for this facility along with 5 percent of employees from LGBTQ and people with disability (PWD) communities,” said GCPL Executive Chairperson Nisaba Godrej.

“The investment of Rs 515 crore over the next five years is in line with GCPL’s long-term strategy to actively participate in India’s growth journey and our unwavering commitment to deliver affordable, best quality and innovative products to consumers,” Nisaba Godrej added.

Nisaba Godrej further added, “We aspire to develop this factory as a lighthouse unit and strive to be amongst the first few factories in Tamil Nadu to achieve this recognition.”

The MOU was signed in presence of Tamil Nadu Chief Minister MK Stalin and GCPL Executive Chairperson Nisaba Godrej.

According to Godrej Consumer, the upcoming manufacturing facility will be strategically located in Thiruporur Taluk, Chengalpattu District near Chennai. This strategic choice guarantees access to crucial southern markets and facilitates meeting requirements in neighbouring regions, it said.

“This stateof-the-art plant will play a pivotal role in accelerating our delivery times, optimizing inventory management, and significantly reducing overall costs. It will serve as a manufacturing hub for a wide range of our renowned brands and products, such as Cinthol,Godrej Expert Rich Crème, Godrej Selfie Shampoo Hair Colour, and Goodknight, bolstering our market presence further. More importantly, our commitment extends beyond business expansion; we are dedicated to making a positive impact on the community and fostering sustainable development in Tamil Nadu,” said Sudhir Sitapati, MD & CEO, Godrej Consumer.

CM Stalin said, “This development holds great promise as it is set to have a positive impact on our local economy by generating employment opportunities and driving our state’s industrial growth.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Godrej Consumer Products set to loosen purse strings to ensure volume growth

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Volume growth is Godrej Consumer Products Ltd.’s primary focus. In a post-earnings interaction with CNBC-TV18, MD & CEO Sudhir Sitapati said that the volume growth is important for the company, as is to invest in advertising. “We really try and push volume growth to the maximum possible,” Sitapati said.

Godrej Consumer Products has earmarked a capex of Rs 900 crore which will be used for setting up new manufacturing units in Tamil Nadu and Madhya Pradesh.

The manufacturing sites are expected to come on stream approximately in 18-36 months and the projects will be funded through a mix of internal accruals and debt.

Sitapati said that half of the capex earmarked is for volume growth while the rest is for efficiency. “We are bullish on our volume growth, we are seeing that our investments are paying back on volume growth and we anticipate that our volume growth will be higher than our historic numbers. So we’ve got to put the capex for it,” he said.

GCPL’s India business reported volume growth of 12 percent for the June quarter, which was in-line with expectations of 11-12 percent. However, Sitapati does not believe that these figures would sustain. “That is probably not the volume growth trajectory of the India business yet. We used to be in kind of low mid-single digits,” he said. “I think we’ve gone past that, because of certain external circumstances. Our Indonesia and Africa business, I think will persist and continue the way they’ve grown in quarter one,” he added.

Godrej Consumer Products made headlines earlier this year when it decided to acquire Raymond’s FMCG business for a cash consideration of Rs 2,825 crore. While GCPL’s MD & CEO does not see much synergies from this deal during the first half of the year, he is hopeful that the synergies will reflect from the second half, on both revenue and cost line.

“We first got to get the business in the right shape, we’ve got to reduce our inventory, we’ve got to reduce accounts receivable, all of these were very different from GCPL norms,” Sitapati said, adding that they will continue to do the same in the September quarter as well. “We hope that in H2, we will start seeing significant synergies both on the revenue line and on the cost line,” he added.

Other Key Takeaways:

– Household insecticides performance led by seasonality
– Indonesia macros have improved, Africa continues to have some turmoil
– Comfortable around 19-20 percent EBITDA margin

Watch this video for the full interview.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Should investors eye Godrej Consumer or book profit as Q1 results miss estimates?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Shares of Godrej Consumer Products Ltd (GCPL) fell up to 3 percent to the day’s low of Rs 1,005.95 on the NSE in Tuesday’s early trade after the consumer goods company reported a 7.6 percent year-on-year (YoY) decline in the June quarter net profit at Rs 318.82 crore.

At 10:33 am, the scrip was trading 2.18 percent lower at Rs 1,008.20 apiece. The stock is trading 8.5 percent lower to its 52-week high of 1101.55, hit on July 6, 2023. GCPL shares have gained 13 percent on a year-to-date basis, while it rallied over 16 percent in the last one-year period.

What analysts say

Analysts are mostly positive on the GCPL stock after the FMCG major’s Q1FY24 print was healthier on quality overall. Foreign brokerage Morgan Stanley has an ‘overweight’ rating on the counter with a target price of Rs 1,072. MS said that Q1FY24 results missed estimates, however, results were way ahead of the company’s performance. “Improving trend in growth, margin and capacity investments are positives for the company,” the brokerage noted.

Nomura has a ‘Buy’ rating on the stock, with a target of Rs 1,225 per share, while CLSA has an ‘underperform’ rating, with a target of Rs 1,040 per share.

Meanwhile, domestic brokerage house Nuvama maintains a ‘Buy’ with a target of Rs 1,315 on the GCPL stock, while Motilal Oswal has a ‘Buy’ rating and a target of Rs 1,200 on the counter.

Emkay too maintains a ‘Buy’ rating and a target of Rs 1,225 per share on the back of accelerated growth in the business and improved profitability, with strategic actions effected under the new leadership.

GCPL on capex spend of Rs 900 cr over next 18-36 months

“Further to its thrust on relevance, access and simplicity in the business, the company is looking at capex spend of Rs 900 crore over the next 18-36 months; this will help drive cost efficiency in the business,” Emkay said.

The company’s consolidated revenue and operating profit came in line with analysts’ expectations, but adjusted PAT (profit after tax) fell short by 14.7 percent due to currency depreciation in Nigeria.

Reported PAT declined 7.6 percent YoY due to a stamp duty related to the Raymond business acquisition. Notably, the gross profit margin grew by 710 basis point (bp) YoY/80 bp quarter-no-quarter (QoQ) to 53.7 percent, with EBITDA margin improving 280 bp YoY, despite a 59 percent rise in adspends.

Raymond Consumer Care Ltd (RCCL) business incurred operating loss due to inventory reduction, yet management aims for equivalent profitability, said Motilal in a note.

“The Raymond’s business put up a lackluster show, with topline at Rs 48 crore (after destocking and sales return of slow-moving SKUs) and EBITDA loss of Rs 44 crore (mainly due to returns and accelerated media spends),” according to Emkay.

Further, analysts noted that GCPL’s profitability outlook is also gradually improving in the overseas business, evident in Q1 through double-digit growth in key geographies. “Working capital enhancement, particularly in the international segment, is also progressing as planned.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow