Buy Godrej Consumer Products: target of Rs 1115: Sharekhan

Sharekhan is bullish on Godrej Consumer Products has recommended buy rating on the stock with a target price of Rs 1115 in its research report dated July 07, 2021.

An Edelweiss research report for Q4FY21 says road tonnage continued to improve, evident in e-way bill generation (up 6% QoQ) and improved core trucking rentals. “We estimate tonnage would increase by three–five percent for truckers. Asset-light plays Mahindra Logistics and TCI Express remain our preferred picks due to their ability to scale up/down as the environment demands,” the report said. Edelweiss is bullish on Blue Dart Express due to the pandemic-induced boom in e-commerce and its leaner cost structure. It has retained a ‘buy’ call on Mahindra Logistics, TCI Express and Blue Dart Express.

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Sharekhan’s research report on Godrej Consumer Products

GCPL’s revenues are expected to grow by ~20% in Q1FY2022 as domestic business grows in the high teens and Africa business clocks a growth of over 50%. OPM would stay almost flat at ~20% (gross margins to decline by 100-130 bps y-o-y). Scale-up in rural penetration to 35% in the medium term; sustained market share gains in key domestic categories, gradual recovery in Indonesia and steady growth in Africa will be key growth drivers. Palm oil prices have fallen 20% from highs, which will reduce pressure on margins in the coming quarters. Also, calibrated price hikes in soaps category will support margins.

Outlook

Revamped growth strategies under a new leadership and improved earnings visibility are key re-rating factors. We maintain a Buy on the stock with a revised PT of Rs. 1,115.

For all recommendations report, click here

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