Chola Securities

Godrej Consumer Products (Buy)

CMP: ₹805.35

Target: ₹980-1,000

Godrej Consumer Products (GCPL) is a FMCG company, with presence in household and personal care segment. Company’s key brands are Cinthol, Good Knight, Godrej No 1, Hit, Godrej Aer, Godrej Expert, BBlunt and Godrej Renew. The company has also acquired Brian Boyce and Vicki Dryden Wyatt Keyline Brands namely Cuticura, Aapri, Erasmic, Inecto and Nulon.

In line with their three-by-three approach they are building a presence in three emerging markets (Asia, Africa, Latin America) across three categories (home care, personal care, hair care). In household insecticides, they are the leader in India and Indonesia and are expanding their footprint in Africa.

India business accounts for 53.4 per cent of the company’s revenue. Africa and Indonesia accounts for 21.8 per cent and 13.5 per cent respectively. Revenue break ups were households and insecticides (40 per cent), soaps (38 per cent), hair colour (12 per cent), other brands (10 per cent), The company is a net debt free company with strong balance sheet and healthy return ratio.

Company’s new launches such as Goodknight Naturals Neem Agarbatti, a 100 per cent natural mosquito repellent and Godrej Nupur herbal-based powder hair colour witnessed encouraging response.

Recently the company has introduced the powder to liquid hand wash which has the opportunity size of ₹8,000 crore and entered male grooming category which has the potential market size of ₹350 crore.

Risks: Increased competition in the domestic personal care segment; leading to lower pricing; margin pressures in overseas business; currency risk.

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