Godrej Consumer: On a roll… - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Godrej Consumer: On a roll…

Oct 23, 2002

Godrej Consumer Products Limited (GCPL) continues to have a good FY03. The company has reported a 15% topline growth (including processing charges) during September quarter. The company finished the quarter with a 32% bottomline growth.

(Rs m)2QFY022QFY03Change1HFY021HFY03Change
Net Sales1,0191,18616.5%2,2872,3352.1%
Processing Charges3623-36.2%365349.7%
Total operating income1,0541,20914.7%2,3232,3882.8%
Other Income43-5.7%4525.0%
Expenditure86699414.7%1,9601,9630.2%
Operating Profit (EBDIT)18821514.6%36342517.1%
Operating Profit Margin (%)18.4%18.1% 15.9%18.2% 
Interest (net)118-29.2%2514-43.3%
Depreciation2322-4.3%4645-2.6%
Profit before Tax15718919.9%29637125.5%
Tax (including deffered tax)5149-4.3%971035.9%
Profit after Tax10714031.5%19826835.1%
Net profit margin (%)10.5%11.8% 8.7%11.5% 
Effective tax rate (%)32.3%25.7% 32.9%27.8% 
No. of Shares (eoy) (m)59.858.1 59.858.1 
Diluted earnings per share*7.39.7 6.89.2 
P/E ratio 11.5  12.0 
(* annualised)      

GCPL's topline growth was aided by strong showing in soaps, hair colour and liquid detergents. Infact, in soaps, its brand 'Godrej No. 1' logged in a huge 96% growth YoY during the the first half of FY03 (1HFY03). Hair colours too, continued to display healthy double digit growth rates. It must be noted that GCPL dominates the Indian hair colour market with a 44.5% share. An increase in contrct manufacturing during the quarter too aided topline growth.

(Rs m)2QFY022QFY03Change1HFY021HFY03Change
Godrej Brands      
Soaps 56765716.0%1,1581,31413.5%
Hair Colour23327518.0%48956014.4%
Toiletries8777-10.6%189171-9.7%
Liquid Detergents233550.6%264053.6%
Total Godrej Brands9091,04414.8%1,8632,08612.0%
Contract Manufacturing79845.9%371130-65.1%
By Products305893.7%53120125.8%
Total1,0191,18616.5%2,2872,3352.1%

At the operational level, the company was able to maintain healthy margins despite a spurt in staff costs (which is not linked largely to performance) and raw material costs. This was because the company got excise benefits from its plant located in Assam. Currently, the plant accounts for 10% of the company's turnover, but contributed around 25% to the company's profits during the quarter.

Cost break-up
(Rs m)2QFY022QFY03Change1HFY021HFY03Change
Raw material46153415.8%1,1121,080-2.9%
Staff486331.1%9312433.8%
Advertising & promotion159147-7.4%363287-21.0%
Others19824926.0%39147220.5%
Total expenditure86699414.7%1,9601,9630.2%

The management explained the loss of market share in the fairness cream segment (Fairglow) as a result of planned phasing out of old stock, to introduce new version of the 'Fairglow' cream. Infact, fairness cream shipment declined by 54% YoY during 1HFY03. The company continues to look for growth in all its branded categories. GCPL is also focusssing on exports to aid topline growth. Its exports to South Africa have commenced and it has tied-up with a third party manufacturer in Bangladesh for exporting its powder hair dye. The company is also boosting its 'Cinthol' presence in the Middle East.

Market share
 2QFY022QFY03
Toilet soaps5.7%5.6%
Hair colour44.3%44.5%
Liquid detergents69.7%80.8%
Shaving cream10.5%11.7%
Fairness cream3.7%2.2%
Talcum powder1.4%1.5%
Deodorants-1.6%
Source: Godrej financial presentation, ORG Data

The company continues to reward shareholder's through its stated policy of increased dividends and/or buyback. GCPL declared its second interim dividend (Rs 2 per share) and also proposed a 3rd buyback scheme at a maximum buyback price of Rs 175 per share not exceeding Rs 100 m outlay.

The management has made no secret of the fact that it wants valuations of the company to strengthen further. But the concern is that the Godrej family already owns over 73% in the company. Going forward, more buyback schemes are likely to squeeze the liquidity on the counter. This may prompt a complete delisting move by the management. Or worse, the valuations of GCPL may continue to depend on the 'crutches' of the management buyback offers and as such may not be able to find its own bearing in the market.

At Rs 111 the stock trades at 12x annualised 1HFY03 earnings, 1.3x market cap to sales. A buyback at Rs 175 signifies a P/E of 19x 1HFY03 annualised earnings, 2.1x market cap to sales. Though the stock may continue its move up led by the buyback offer, going forward a 19x valuation may not be sustainable. Also, 'Godrej No. 1', which has spearheaded the topline growth accounts for 25% of the company's turnover. Such dependence on one brand has to be viewed with caution.

Equitymaster requests your view! Post a comment on "Godrej Consumer: On a roll…". Click here!

  

More Views on News

GODREJ CONSUMER 2020-21 Annual Report Analysis (Annual Result Update)

Oct 26, 2021 | Updated on Oct 26, 2021

Here's an analysis of the annual report of GODREJ CONSUMER for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of GODREJ CONSUMER. Also includes updates on the valuation of GODREJ CONSUMER.

Godrej Consumer Products Shares Decline Post June Quarter Results (Views On News)

Aug 5, 2021

Adi Godrej, the Chairman of the Godrej Group, has decided to step down from the board of directors of the company.

Why Did Godrej Consumer Products Shares Zoom 20% Today? (Views On News)

May 12, 2021

The company's share price hits upper circuit after 59% jump in Q4 profit.

These FMCG Stocks Underperformed Sensex in the Past One Year. Can They Reverse Course? (Views On News)

May 24, 2021

Despite growth in volumes, top FMCG stocks underperform BSE Sensex. How long will this underperformance last?

Adani Wilmar IPO to Hit the Market Soon. Should you Apply? (Views On News)

Nov 29, 2021

The parent company of the brand Fortune is set to raise Rs 45 bn from the market.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

6 Penny Stocks that Rallied 1,000%+ in One Year (Views On News)

Dec 6, 2021

These penny stocks shed their penny status by surging 1,000% or more in the last one year.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

GODREJ CONSUMER SHARE PRICE


Dec 8, 2021 11:17 AM

TRACK GODREJ CONSUMER

  • Track your investment in GODREJ CONSUMER with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON GODREJ CONSUMER

GODREJ CONSUMER 5-YR ANALYSIS

COMPARE GODREJ CONSUMER WITH

MARKET STATS