Motilal Oswal Recommends Buy This Godrej Group Stock Ahead Of Quarterly Result Update

Motilal Oswal has assigned a buy on the stock of Godrej Consumer Products Limited (GCPL ). It has assigned a target price of Rs 1,035 apiece. The company released its pre-quarterly update for 3QFY23. If you buy the stock at the current market price, it would fetch gains up to 13% considering the given target price.

Godrej Consumer Products is a large-cap Godrej Group company that operates in the FMCG sector engaged in manufacturing and marketing Household and Personal Care products. It has a market capitalisation of Rs 93,821.64 crore.

Stock Overview - Current Market Price, Potential Upside, 52-week High/low

On Friday, 6 December, last traded at Rs 917.45 apiece on NSE, up 0.10% from the previous close. The stock recorded its 52 week high on 10 January 2022 at Rs 962.75 apiece and 52 week low on 8 March 2022 at Rs 660.05 apiece, respectively.

The stock surged 4.97% in the past 5 days. Whereas, in the past 1 and 3 months, the stock surged 3.58% and 7.47%, respectively. However, in the last 1 year, the stock has fallen 3.33%. It has given 31.55% positive return in 3 years and 39% in 5 years, respectively.

Gross margin to improve meaningfully

GCPL released its pre-quarterly update for 3QFY23. Here are the key highlights:

1. Macros: 

• The FMCG sector witnessed slow growth due to continued poor rural consumption.

2. India business:

• Sales growth may be in double digits YoY.
• Volume may grow in low single digits YoY.
• Home Care and Personal Care may witness double-digit sales growth.

3. Indonesia business:

• The Indonesia business may report a constant-currency sales decline in low single digits.
• Ex-Hygiene portfolio, the business may see marginally positive growth.

4. GAUM (Godrej Africa, the US, and the Middle East) business:

• The business witnessing strong sales momentum.
• Sales to grow in double digits on constant currency basis.

5. Consolidated level:

• Sales may grow in mid-teens on constant currency basis and in double digits in INR terms.
• Volumes may be flat YoY.
• Gross margin may see a healthy recovery in the quarter.
• EBITDA may grow in high single digits YoY.

Valuation and view

Since the new CEO is focusing on boosting growth in the high-margin, high RoCE domestic business, we believe the company's medium-term earnings growth outlook is strong.

Valuation at 34x Dec'24E EPS is attractive, given the potential earnings CAGR of ~16% over FY22-25E. Maintain BUY with a TP of INR1,035.

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.