Godrej Consumer Rises on Bullish Recommendations by Jefferies and Morgan Stanley

On October 6, Godrej Consumer Products Ltd (GCPL) saw its shares climb by one percent, reaching a day’s high of Rs 987, following positive assessments from global brokerage firms Jefferies and Morgan Stanley.

These bullish recommendations came on the heels of the company’s announcement of mid-single-digit volume growth in its business update for the July-September quarter (Q2FY24).

Jefferies analysts have bestowed a “buy” rating on the stock, setting a target price of Rs 1,200 per share. Meanwhile, Morgan Stanley has an “overweight” rating and a target price of Rs 1,072 per share.

According to the company’s Q2 update, the home-care segment recorded mid-single-digit volume growth, while the personal care segment experienced low-single-digit growth.

Despite challenging operating conditions, including adverse weather conditions during the quarter, the organic business demonstrated robust growth.

GCPL’s overseas business in Indonesia reported double-digit volume and value growth, highlighting the success of its international expansion efforts.

In contrast, the Godrej USA, Africa, and Middle East (GAUM region) maintained consistent performance, achieving constant currency sales growth in the mid-teens.

Jefferies noted that the home-care segment performed better than personal care, and the acquired Raymond portfolio showed improvement on a sequential basis.

“We expect margin expansion to be robust across business segments on a year-on-year (YoY) basis. The margin expansion would thereby support earnings growth despite a weak volume print,” commented analysts at Jefferies.

However, analysts did observe that Godrej Consumer’s Q2 organic volume growth, though in the mid-single digits, was lower compared to the 10-11 percent growth seen in the last two quarters.

As of 1:01 pm, the stock was trading at Rs 971.65 on the BSE, marking a decrease of 0.57 percent from the previous closing price.

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