 "Godrej Consumer Products")
The stock of consumer major Godrej Consumer Products (GCPL) rose over 6 per cent and was the highest gainer in the Nifty FMCG as well as the BSE100 indices.
The spurt in stock prices is in response to the strong June quarter (Q1FY26) show of the company.
A double-digit consolidated revenue growth comfortably beat Street estimates of a mid single digit rise.
The stock has gained about 26 per cent since the start of March and has outperformed the Nifty FMCG return which is in single digits over this period.
Aided by a high single digit volume growth, GCPL is expected to post a double digit growth on a consolidated basis.
The overall growth is expected to be driven by a robust show of the India home care business especially the household insecticides or HI segment and the Africa geography.
In addition to HI, home care includes air care and detergents. It accounts for 45 per cent of India sales and 27 per cent of the consolidated business.
Value growth for the India business is expected to be in the high single digits, while volume growth would be in mid single digits and aided by sequential improvement.
Volume growth, according to the company, would have been in double digits if soaps were excluded.
Commenting on the performance of the company, other analysts led by Abneesh Roy of Nuvama Research point out that FMCG majors, barring those that have large summer categories, are surprising positively. This indicates that the worst of the slowdown is behind and there is a gradual recovery ahead.
For GCPL, the HI segment in India beat expectations with mid-to-high single digit growth and was led by incense sticks and new electrical formulations. It was on strong June recovery from new ad campaigns and favourable weather.
Household insecticides had delivered strong double digit volume growth in Q4FY25 boosted by a favourable season and effective premiumisation.
Goodknight Agarbatti emerged as the market leader, while premium formats like liquid vaporiser with a new molecule RNF continued to grab market share. This reflects consumer acceptance and the success of premiumisation efforts.
While home care did well, personal care (51 per cent of India sales) is expected to grow in low single digit in the quarter and would be impacted by the soaps segment that saw price-volume rebalancing due to commodity volatility.
Steep rise in palm oil inflation and price adjustments had led to volume decline in the March quarter and compressed margins.
Standalone (India business) operating profit margins are likely to be below its normative range (24-26 per cent) due to higher input costs, advertising and promotional spend and delayed pricing action in soaps.
Given these pressures, analysts led by Mehul Desai of JM Financial Research expect margin compression of 270 basis points (bps) year-on-year (Y-o-Y).
With palm oil prices moderating at the end of June, the company expects the gains to flow through to the operating level in the second half of FY26.
In the international business, Indonesia, which accounts for 14 per cent of consolidated sales, would deliver flattish volume growth on account of rising competitive pressures.
The other parts of the global business, which are clubbed under Godrej Africa, USA and Middle East, are expected to maintain their growth momentum. This would deliver double digit value and volume growth in addition to robust margins.
The company has maintained its guidance of high single digit consolidated revenue growth driven by mid-to-high single digit volumes for the standalone business in FY26.
The pre-quarter update and the strong near term outlook are expected to support the stock.
