Godrej Consumer Products, the demerged FMCG business of erstwhile Godrej Soaps, recently declared its first ever quarterly results. The company posted a net profit of Rs 92 m on sales of Rs 1,404 m during the quarter. The turnover is up 35% compared to first quarter of last year.
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Most of the segments in which Godrej Consumer operates in have shown a good growth. A huge 55% growth (value terms) in toileteries has come largely because of good response to 'Fairglow' range of products. Contract manufacturing has also shown a good growth this quarter. However, the management has indicated that this trend in contract manufacturing may not continue in the coming quarters.
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The management looks more focused on its FMCG business than in the past. The company's relaunch of its brand 'Godrej No. 1' has resulted in a 318% growth in volume sales during 1QFY02. The company is re-launching its key brand 'Cinthol' soon.
On the financial side, the company has repaid Rs 344 m of its debt during the quarter. Its debt stands reduced to Rs 351 m currently. Godrej Consumer is now operating on a negative working capital and the management looks keen to maintain this.
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Currently, Godrej has a 5.9% market share in toilet soaps. This share has not varied much over the last few years. However, it has cornered a 3.6% share of the fairness cream segment, thanks to 'Fairglow'. The company has increased its market share in the Hair Colour segment to 44.5% this quarter. Its share was 41.8% in the corresponding quarter last year.
The first quarter performance of the company is encouraging and going by the management's commitment to this business, the future looks good, especially in the toiletries and the hair colour segment.
At the current price of Rs 48 the stock trades at a P/e multiple of 7.9 times its 1QFY02 annualised earnings. These valuations are among the lowest in the FMCG circle. Probably, the management's past performance continues to cast a shadow on the valuations. However, if the company can maintain this growth momentum and its focus, valuations would definitely see an upswing.
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