Godrej Consumer gains 6% despite 75% drop in March quarter net profit

Shares of Godrej Consumer Products (GCPL) gained over 6 per cent on the BSE in an otherwise weak market on Thursday after its consolidated net profit for the quarter ended March 2020 decined 75.4 per cent year-on-year (YoY) to Rs 229.90 crore. The company had logged a profit of Rs 935.24 crore in the year-ago period. The result was in line with the analysts estimate.

With today’s gain, the stock has climbed 17 per cent in the past one week, as compared to a 0.14 per cent decline in the S&P BSE Sensex. It had hit a 52-week low of Rs 425 on March 23, 2020.

At 10:12 am, the stock was ruling over 5 per cent higher at Rs 563.25 apiece on the BSE. In comparison, the benchmark S&P BSE Sensex was trading over 1.5 per cent lower at 31,507.20 levels.

Net sales (revenue) declined 12.2 per cent to Rs 2,132.69 crore against Rs 2,429.68 crore in the corresponding quarter of the previous fiscal. Total income for the quarter under review came in at Rs 2,202.96 crore, down 11.23 per cent against Rs 2,481.72 crore in the year-ago period. 

Basic earnings per share (EPS) stood at Rs 2.25 against Rs 9.15 in the March quarter of FY19. 

For the full year, net profit declined 36.09 per cent to Rs 1,496.58 crore as against Rs 2,341.53 crore during the previous year ended March 2019. Sales declined 3.86 per cent to Rs 9,826.51 crore as against Rs 10,221.07 crore in the previous year.

The company noted that its sales have been affected adversely due to Covid-19 lockdown in India as well as overseas locations and it continues to monitor the situation closely. 

"As per our current assessment, other than the impairment recorded, no significant impact on carrying amounts of inventories, goodwill, intangible assets, trade receivables, investments and other financial assets is expected, and we continue to monitor changes in future economic conditions. The eventual outcome of the impact of the global health pandemic may be different from those estimated as on the date of approval of these financial results," it said. 

Edelweiss Securities in its results review note said that GCPL’s domestic business had started to recover as management was taking corrective actions. However, it now expects this recovery to be gradual. "We retain ‘BUY/SP’ with TP of Rs 654."