Motilal Oswal has given Buy recommendation for Godrej Consumer recommended buy rating on the stock with a target price of Rs 1180 in its research rep with a target price of Rs. 1180 in its research report issued on Nov 11, 2021
Motilal Oswal’s research report on Godrej Consumer
GCPL’s 2QFY22 result was in line with our expectations. While rising material costs could lead to a sequential EBITDA margin contraction in 3Q, the management is positive of a more normalized margin by 4QFY22, given the forthcoming price increases. The investment case as highlighted in our upgrade note in May’21 and a detailed note in Jun’21 is intact. The positive trend on double-digit domestic sales that was restarted in FY21 (after a lackluster second half in the previous decade) has continued in 1HFY22. The good work on the Balance Sheet front in recent years also continued in 1HFY22, with RoCE crossing 20%. The Africa business recovery, albeit at an early stage (only 1.5 years into its five-year plan), is also encouraging. All of this makes the task of the new CEO relatively easy, enabling him to focus on further driving domestic growth. With the stock retracing some of its gains, valuations at 44.7x FY23E EPS are attractive. GCPL remains our top pick in Staples.
We maintain our Buy rating. Valuing GCPL at 45x Dec’23E EPS, we arrive at our TP of INR1,180, a 23% upside to its CMP.