Godrej Consumer Products gains 4% as Morgan Stanley maintains 'overweight'

Godrej Consumer Products surged 4.13 per cent to Rs 673.2 on the BSE on Wednesday after reports said global financial services firm Morgan Stanley has maintained its 'overweight' stance on the counter. The target price is set at Rs 845 apiece, which is 30.7 per cent higher from the last closing price.

Analysts at Morgan Stanley "believe that the share price of the stock will rise relative to the index" and may report acceleration in domestic volume growth".

Besides, the brokerage expects a likely expansion in the company's operating margin of its international business.

At 10:24 AM, the stock was trading 3.8 per cent higher at Rs 671 per share. In comparison, the benchmark S&P BSE Sensex was ruling 0.41 per cent higher at 40,403.76 levels.

During the July-September quarter, the consumer goods company reported a 28.36 per cent dip in consolidated profit after tax (PAT) at Rs 413.88 crore, as against a Rs 577.73 crore profit logged in the corresponding quarter of the previous fiscal. The consolidated sales during the quarter under review came in at Rs 2,608.15 crore, down 1.33 per cent YoY, as against Rs 2,643.26 crore in the year-ago period.

"After four quarters of flat-to-negative growth in H1, this quarter marked a recovery (up 4 per cent YoY) backed by higher-than-mid single-digit volume growth and plateauing contribution of illegal incense sticks at 11–12 per cent. Besides, persistent softness in the GAUM region, which includes Africa, USA, and Middle East markets, (-6 per cent YoY) continues to weigh on international business, which reported growth of 3 per cent YoY. Lower ad spends on standalone (down 151bps YoY) and 380bps YoY expansion in GAUM lifted consolidated EBITDA margin by 344bps YoY," wrote analysts at Edelweiss Securities in a results review note. The brokerage firm maintains a 'buy' on the stock, with a target price of Rs 831. 

"GCPL’s domestic performance is clearly showing signs of recovery backed by strengthening HI (management has taken corrective action). Growth in international business (IB) coupled with margin expansion would be key going forward," it added.