With Resilient Performance, This Consumer Goods Stock Is A Good Buy: Yes Securities

Why should you buy this stock?

Yes Securities explained, "The key positives for the quarter were market share gains in Parachute rigids despite category decline of 4% and strong performance from the International business. Saffola edible oil growth normalized from a high base while recovery momentum continued in premium personal care portfolio and foods business achieved the aspiration of Rs 5bn turnover in FY22. With launch of Saffola peanut butter and Mayonnaise, company expanded TAM to Rs 60bn for Foods portfolio aided by entry in new segments like honey, noodles and soya chunks. Company is also focusing on digital‐first brands with an aspiration of reaching Rs 4.5‐5bn revenue by FY24 via both organic and inorganic means." While management indicated that benefits of moderation in input costs like copra will be passed on to consumers, margins have already started improving despite an increase in ad spends led by tight control on SGA. International business also delivered strong performance led by improvement in Vietnam and MENA." The brokerage added, "12% CC growth with 20bps EBIT margin shrinkage to 18.7% with 16% growth in Bangladesh, 7% growth in Vietnam, 20% in SA and 11% growth in MENA."

Result Highlights

According to the brokerage, "5% growth in domestic business with 1% volume growth, 12% CC growth in international business driving 7.4% consolidated revenue growth (2‐yr CAGR of 20%); market share gains of 170bps in Parachute rigids and 90bps in VAHO. Gross margin improved 40bps/80bps YoY/QoQ. Higher gross margin QoQ indicates superior product mix. EBIDTA margin came in at 16% with higher A&P and other expenses. However, ad spends lower by 9% QoQ. 1% volume growth in Parachute on base of 29, 3% value growth in VAHO on base of strong 22% growth and 17% value growth in Saffola on base of 43% value growth."

Buy this stock for a target price of Rs 603

The brokerage has said, "We trim our estimates marginally to incorporate lower revenue growth and margins and now model in revenue/EBITDA/PAT CAGR of 11%/18%/19% over FY22‐24E driven by multiple levers like further share gain possibilities in Parachute, premium VAHO and foods portfolio, strong momentum in international markets and continued strengthening of distribution and digital infrastructure. We maintain our BUY rating with revised PT of Rs 603 based on 45x FY24E EPS, a 10% premium to its 5‐yr average multiple and in‐line with the multiples given to peers like GCPL, Tata Consumer and Dabur."