Godrej Consumer Products soars 12%, hits new high on Ebitda beat in Q3

Analysts believe the execution machinery being put in place by GCPL is yielding good results with improvement seen in underlying metrics alongside higher cash-generation

Shares Godrej Consumer Products (GCPL) hit a new high of Rs1,299.90, soaring 12 per cent on the BSE in Thursday's intraday trade, amid heavy volumes as the company delivered healthy operational performance in the December quarter of FY24.

Its gross margin improved sharply by 470 bps year-on-year (Y-o-Y) and 100 bps quarter-on-quarter (Q-o-Q) in December quarter (Q3FY24), while earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin, too, improved by 280 bps Y-o-Y despite continued media investments, which increased by 32 per cent Y-o-Y, the company said.

The stock surpassed its previous high of Rs 1,229.95, touched on January 5. At 10:29 AM, GCPL was quoting 10 per cent higher at Rs 1,282, as comparedto 0.33 per cent rise in the S&P BSE Sensex. The average trading volumes on the counter jumped over 10-fold today with a combined 5.13 million equity shares, representing 0.5 per cent of total equity of GCPL, having changed hands on the NSE and BSE.

The fast moving consumer goods (FMCG) major GCPL reported a 6 per cent Y-o-Y increase in consolidated net profit to Rs 581 crore in Q3FY24, aided by volume growth in the domestic market. Consolidated revenue was up 1.54 per cent Y-o-Y to Rs 3,623 crore during the quarter, impacted by devaluation, constant currency growth of 19 per cent Y-o-Y.

Consolidated volumes grew by 8 per cent led by the India business growing volumes at 12 per cent and Indonesia growing volumes at 9 per cent, GCPL said, adding, consolidated revenue growth was significantly impacted by the devaluation of the Naira and the Argentine Peso.

The management sounded confident about the structural impact that these improved-formulation products would have on Household insecticides growth trajectory going forward. Launch of the new low-priced liquid-detergents is equally interesting (and could necessitate response from competitors sooner orlater).

"GCPL’s Q3FY24 earnings were ahead of expectations. Topline growth, whilst tad better than our forecast, was soft, as organic growth was impacted by price-cuts in Soaps and adverse currency issues in Africa and Latam," analysts at JM Financial Institutional Securities said.

Profitability, however, surprised positively led by much better gross margin and impressive costs management, which drove an 8 per cent beat vs our profit estimates for the quarter, the brokerage firm said in the result update.

It believes the execution machinery being put in place by GCPL is yielding good results with improvement seen in underlying metrics alongside higher cash-generation.

"GCPL has improved the India business sales growth in recent years. It has delivered industry-leading volume growth in the India business over 9MFY24, and is likely to record a double-digit EPS growth over FY24-26E," said the brokerage firm Motilal Oswal Financial Services in the result update.

The implementation of disruptive innovations, the introduction of access packs, expansion into new growth categories and increased advertising expenditure are anticipated to contribute to a consistently robust growth trajectory in this high-margin and high-ROCE domestic business, the brokerage firm said.