Godrej Consumer Products' stock down by more than 4%

6 Oct 2022 , 02:58 PM

In spite of a generally strong market, Godrej Consumer Products Limited (GCPL) shares fell 7% to Rs836.75 in intraday trade on Thursday. This was because the company forecast an EBITDA decline in the mid-teens for the September quarter (Q2FY23), which was attributed to high inventory costs, high marketing expenses, and subpar Indonesian performance.

The personal care products firm anticipates a rebound in consumption, an increase in gross margins, and forward marketing spending in the next quarters despite the large correction in commodities like crude oil and derivatives of palm oil.

"Throughout the quarter, the Indian FMCG market remained weak. Compared to urban markets, rural markets grew more slowly. The second half of the year will see an increase in consumption, according to GCPL's Q2FY23 business report, as commodity price corrections have moderated inflationary pressures and monsoon trends are broadly on track (except a few states).

Sales growth in Latin American companies will increase in constant currency, according to the Godrej Group organization. "At a consolidated level, we keep utilizing our geographic and category portfolio. With a near to double-digit three-year CAGR, we anticipate delivering sales growth above mid-single digits. We anticipate sales growth in the low double digits, excluding Indonesia's hygiene comparator, said GCPL.

Analysts feel that the hiring of a new CEO at GCPL has the potential to bring about dramatic change, particularly if the company is successful in accelerating domestic business growth and maintaining its commitment to the best capital allocation practices.

The company's medium-term profits growth prognosis is favorable, according to Motilal Oswal Financial Services, as investments by the new CEO are concentrated on fostering development in the high-margin, high-RoCE domestic industry.

Nevertheless, despite GCPL's loss on Thursday at the stock exchanges, the stock has outperformed the market in the last six months, rising 13% compared to a 2% decline in the S&P BSE Sensex. However, it underperformed the market during the last year, declining 16% as opposed to the benchmark index's 1% loss.

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