Motilal Oswal has given Buy recommendation for Godrej Consumer recommended buy rating on the stock with a target price of Rs 1020 in its researc with a target price of Rs. 1020 in its research report issued on Jun 08, 2021
Motilal Oswal’s research report on Godrej Consumer
As stated in our upgrade note four weeks ago, we regard the appointment of Mr. Sudhir Sitapati as MD and CEO from Oct’21 as a potential transformational change for GCPL’s prospects. In that note, we highlighted: a) weak domestic sales growth in the last five years; b) Mr. Sitapati’s pedigree, experience, tenure of his appointment as CEO, as well as his young age, enabling potentially significant extension of tenure; c) how new CEOs with a fresh thought process have led to structural change in the earnings prospects of Consumer companies like BRIT, NEST, JUBI, and HUVR over the last 15 years; and d) how the low penetration in Household Insecticides and Hair Color offers a high growth opportunity. All these factors led us to upgrade the stock to Buy after over a decade of maintaining our Neutral rating.
Outlook
There are no changes to our modest earnings growth forecasts of ~8%/16% in FY22E/FY23E as we await the path to growth that the new CEO unveils when he joins in Oct’21. Valuing GCPL at 45x Jun’23E EPS (40x Mar’23E earlier), we arrive at our TP of INR1,020, a 19% upside to its CMP.