This Godrej group stock has zoomed 33% in 2 days on heavy volumes

Shares of Godrej Industries surged 15 per cent to Rs 1,147 on the BSE in Friday's intra-day trade, extending its Thursday's rally in an otherwise weak market

Shares of Godrej Industries (GIL) surged 15 per cent to Rs 1,147 on the BSE in Friday’s intra-day trade, extending its Thursday’s rally in an otherwise weak market. In the past two days, the stock of the Godrej group company has soared 33 per cent. It is quoting higher for the fifth straight trading day, zooming 43 per cent during the period. The stock had hit a 52-week high of Rs 1,313.95 on September 6, 2024.

 

At 11:15 am, GIL shares were trading 9 per cent higher at Rs 1,094, as compared to the 0.63 per cent decline in the BSE Sensex. The average trading volumes on the counter jumped over six-fold, with a combined 6.9 million equity shares having changed hands on the NSE and BSE.

 

GIL, one of India's leading manufacturers of oleochemicals, makes more than a hundred chemicals for use in over two dozen industries. It also manufactures edible oils, vanaspati and bakery fats.

 

GIL is also the holding company for Godrej group entities, with shareholding in Godrej Consumer Products (GCPL), Godrej Agrovet (GAVL) and Godrej Properties (GPL), which are also listed on the exchanges.

 

GIL’s investment portfolio is spread across diverse business areas through different investee entities viz. GAVL (animal feeds, vegetable oil, agricultural inputs, crop protection, dairy and dairy products), GCPL (personal care, home care and hair care), GPL (property development) and Godrej Capital (NBFC and housing finance company).

 

For the October to December 2024 (Q3FY25) quarter, GIL had reported a 77 per cent year-on-year (YoY) growth in its consolidated net profit at Rs 188 crore, on the back of healthy operational performance. Total income grew 34 per cent YoY at Rs 5,147 crore.

 

The company’s chemicals business had posted solid numbers with profit before interest and tax (PBIT) jumping 265 per cent YoY to Rs 113 crore from Rs 31 crore in Q3FY24. Revenue rose 44 per cent YoY at Rs 891 crore. Exports accounted for around 30 per cent of revenue, which increased by 58 per cent YoY.

 

After witnessing a 81 per cent YoY growth in revenues from this business in FY2022 and 35 per cent in FY2023 due to high demand and increase in realisations, the same declined by 37 per cent on a YoY basis in FY2024 due to normalisation of prices. The business operating profit margin (OPM) thus normalised to 12.4 per cent in FY2024 from 16.3 per cent in FY2023. 

 

GIL witnessed a slight increase in volumes and realisations and the same are likely to improve further in H2 FY2025, according to ICRA. The rating agency thus expects an improvement in GIL’s interest coverage ratio and debt-service coverage ratio (DSCR) over the near-term, also supported by the increased dividend income.

 

GIL’s standalone business profile is dominated by its oleochemicals business, which contributes 85-95 per cent to its standalone revenues. Thus, GIL’s financial profile remains vulnerable to the performance of this cyclical business. Cyclicality was visible in FY2024 when the revenues and profitability were impacted by industry wide destocking, leading to significant price corrections.

 

GIL is susceptible to raw material price movements, however, historically it has kept its inventory level in check to ensure that it does not stock excess inventory and lose when the prices turn unfavourable. For domestic sales, the company is able to pass on the fluctuations in input prices to its customers, however, for exports, the price fluctuations are passed on with a lag of 2-3 months, basis the contract with customers, ICRA said in its rating rationale for the company.