StockMarket Update on Godrej Consumer Products for 1QFY2012 with an Accumulate recommendation and a Target Price of `478 (12 months)
Godrej Consumer (GCPL) posted mixed set of numbers for the quarter. Consolidated top-line growth was strong at 39.6% yoy, led by recent acquisitions; thus, this quarter’s numbers are not directly comparable to 1QFY2011 numbers. Domestic revenue growth stood at 21% yoy, aided by full consolidation of Godrej Household Products (GHPL). Reported earnings grew modestly by 94% yoy, aided by high extraordinary income due to the settlement of Sara Lee JV termination. We maintain our Accumulate rating on the stock.
Robust inorganic growth: GCPL reported strong top-line growth of 39.6% yoy to `997.8cr, driven largely by the consolidation of recent acquisitions. Domestic business (including GHPL’s additional 51% consolidation) registered growth of 21% yoy to `643cr. Soaps registered ~17% yoy growth and hair colour registered growth of 19% yoy during the quarter. International business revenue stood at `360cr, registering growth of 94% yoy. Reported earnings registered growth of 94% yoy to `239.3cr (`123.2cr).
Outlook and valuation: GCPL’s recent acquisitions have been in-line with its 3X3 strategy and enable the company to spread its footprint and grow inorganically. At the CMP of `440, the stock is trading at 21.2x FY2013E earnings of `20.8. We maintain an Accumulate rating on the stock with a target price of `478, based on 23x FY2013E EPS.
