Godrej Consumer wipes early gains post Q3 results; stock falls 3%

Shares of Godrej Consumer Products rose as much as 1.5 percent on Wednesday, reacting to quarterly earnings performance. However, the stock wiped initial gains and was now trading in the red.

At 9:20 am, shares of the fast-moving consumer goods player were down 2.9 percent at Rs 853.75 on BSE.

The FMCG major reported a near 5 percent year-on-year (YoY) increase in consolidated net profit at Rs 527.60 crore for the third quarter ended December. In the corresponding quarter last year, the company posted a net profit of Rs 502.80 crore.

The company's total revenue from operations rose 8 percent to Rs 3,302.58 crore during the reporting quarter, as compared to Rs 3,055.42 crore in the corresponding period last fiscal.

India business sales grew by 8 percent YoY whereas Africa, the US and the Middle East saw 13 percent sales growth in Rupees and 12 percent in constant currency terms.

Indonesia sales declined by 2 percent in constant currency terms and were flat in Rupees, while Latin America & SAARC sales grew by 10 percent in INR and 19 percent in constant currency terms on a YoY basis.

GCPL Q3 results: Net profit rises 5% YoY to Rs 527.60 crore, sales up 8% to Rs 3,302.58 crore

“While overall sales grew by 8 percent, and we remain on track to achieve double-digit sales growth for the full year, it was driven entirely by price-led growth. We believe that with the relatively non-discretionary, mass pricing of our portfolio and very good performance on market shares, volume growth will return in the medium term. On the other hand, while our overall EBITDA de-grew by 2 percent and PAT declined by 1 percent, the quality of profits has improved,” said Sudhir Sitapati, Managing Director and CEO, Godrej Consumer Products.

“We continue to have a healthy balance sheet and our net debt to equity ratio continues to come down. We are on a journey to reduce inventory and wasted cost and deploy this to drive profitable and sustainable volume growth across our portfolio through category development,” Sitapati added.

Sharekhan noted that the immediate focus of the company under the new leadership is to fill the gaps to achieve sustainable double-digit volume growth in the medium term.

Increased penetration, cross-pollination, simplifying business in key markets and increased distribution are some of the key growth drivers in the medium-term. Further, the brokerage firm believes that the success of the revamped strategy under the new leadership with sustained double-digit growth will be key triggers for valuations to improve in the coming years.

The stock has underperformed compared to its peers and broader indices and trades at an attractive valuation, Sharekhan said maintaining its 'buy' call on the stock.