Motilal Oswal has given Buy recommendation for Godrej Consumer recommended buy rating on the stock with a target price of Rs 1250 in its research r with a target price of Rs. 1250 in its research report issued on Aug 30, 2021
Motilal Oswal’s research report on Godrej Consumer
Even before the new CEO has taken over, likely in Oct’21, GCPL has been performing consistently well in various large categories over the past year. As highlighted in our 1QFY22 results note, both key domestic categories of Household Insecticides (HI) and Soaps posted a double-digit two-year CAGR during the quarter. The sales momentum is also leading to increased asset turns. Consequently, ROCE seems poised to cross 20% levels for the first time in a decade, after languishing in the mid-teens for most of this period.
The outlook remains promising, with the possibility of significant improvements. ROCEs could improve further in case of a) the sales momentum picking up further under the new CEO, b) a further increase in the contribution of the higher margin, higher ROCE domestic business to sales (nearly 2x higher margins in domestic v/s international business), and c) continued efforts to boost margins and ROCEs in the international business. Maintain Buy, with TP of INR1,250 (45x Dec’23 EPS).