Stock in Action – Godrej Consumer Products Ltd

Movement of Day

Technical Analysis

1. The stock is currently trading at higher level, reflecting positive one-week performance of 6.87%.
2. Over past month, it has maintained consistent upward trajectory with 6.70% gain. 
3. The three-month trend has been notably bullish, showcasing robust 24.79% increase. 
4. Year-to-date performance remains strong at 9.34%, indicating sustained positive momentum. 
5. The one-year return of 31.62% reflects solid long-term growth trend. 
6. Over past three years, stock has demonstrated substantial strength, with impressive 65.39% cumulative increase, suggesting resilient & bullish market sentiment.

Probable Rationale Behind Godrej Consumer's Stock Surge

Godrej Consumer Products (GCPL) witnessed remarkable surge of 12%, reaching new high of ₹ 1,299.90 in intraday trade on Thursday. stock's outstanding performance can be attributed to its robust operational results for Q3FY24, exceeding market expectations. Notably, key factors contributing to this surge include improved gross margins, impressive Ebitda growth, & strong operational metrics.

Financial Performance

Consolidated Net Profit

GCPL reported consolidated net profit of ₹ 581 crore in Q3FY24, registering 6% YoY increase, surpassing analyst estimates of ₹ 566 crore.

Consolidated Revenue

Consolidated revenue grew by 1.54% YoY to ₹ 3,623 crore, slightly below analysts' expectations of ₹ 3,680 crore, impacted by currency devaluation.

Steady underlying sales growth marred by currency devaluations.

EBITDA

EBITDA soared impressively by 16% to ₹ 841 crore, outperforming market estimates of ₹ 815 crore.

Margins

Margins experienced notable increase, reaching 23%, compared to 20.2% in same quarter last fiscal, surpassing research estimates of 22%.

Stock Performance

GCPL stock reached new high of ₹ 1,299.90, marking 12% surge, outpacing its previous high of ₹ 1,229.95 on January 5.

Operational Highlights

Gross Margin Improvement

GCPL witnessed significant improvement in gross margins, rising by 470 bps YoY & 100 bps QoQ in Q3FY24.

Media Investments

Despite 32% YoY increase in media investments, EBITDA margins improved by 280 bps YoY, showcasing efficient cost management.

Volume Growth

Consolidated volumes grew by 8%, with India business leading at 12% & Indonesia at 9%, reflecting positive operational metrics.

Investor Sentiment

Stock Movement

At 10:29 AM, GCPL was trading 10% higher at ₹ 1,282, significantly outperforming S&P BSE Sensex.

Trading Volumes

Average trading volumes surged over 10-fold, with 5.13 million equity shares changing hands on NSE & BSE, representing 0.5% of total equity.

Operational Efficiency

GCPL's focus on operational efficiency, evident in improved gross margins & effective cost management, has positively influenced investor confidence.

Earnings Beat

The company's Q3FY24 earnings surpassed expectations, driven by better-than-anticipated profitability & impressive cash generation.

Strategic Initiatives

The execution of disruptive innovations, introduction of access packs, & expansion into new growth categories have contributed to robust growth trajectory.

Let’s Dig into Segment Performance

Home Care (1/4): Delivered steady performance in Household Insecticides
• Household Insecticides volume growth stable at low-single digit.
• Non-mosquito portfolio continues to consistently perform significantly well.
• On track to turnaround HI – Launched Goodknight Agarbatti in January, additional actions in pipeline.

Home Care (2/4): Launched Goodknight Agarbatti with exclusive & close to 2x more effective molecule
• Entering ~ 1,200 crore incense stick market; primarily illegal.
• Goodknight Agarbatti - India’s only Government registered active based anti-mosquito legal agarbatti.
• Goodknight Agarbatti uses new molecule, RNF*, which is close to 2x more effective than most other molecules used in India.
• GCPL enjoys exclusivity to use this molecule in medium term.

Home Care (3/4): Consistently delivering double-digit growth in Air Fresheners
• Air Fresheners continue to consistently deliver double-digit volume growth.
• Aer continues to gain share & enjoy market leadership.
• Air Fresheners has close to doubled its salience over last 2 years.

Home Care (4/4): Strong entry in fast-growing Liquid Detergent market
• Fabric Care delivered strong double-digit volume growth.
• Genteel & Ezee continue to deliver steady performance.
• Launched Godrej Fab Liquid Detergent in select markets at category defining price of 99 per litre.

Personal Care (1/2): Personal Wash delivers steady performance
• Personal Wash delivers mid-single-digit volume growth.
• Our market shares increased, led by effective media campaigns & micro-marketing initiatives.
• Magic Hand wash continues to deliver strong double-digit volume growth.

Personal Care (2/2): Strong growth in Hair Colour
• Hair Colours volume grew in double-digit led by both Godrej Expert Rich Crème & Godrej Selfie Shampoo Hair Colour.
• Access packs have significantly outperformed in both Godrej Expert Rich Crème & Shampoo Hair Colour.
• Continue to gain market share.

Park Avenue & KamaSutra performance on track

Continuing healthy sales run-rate delivered in Q2; clocked sales of 139 crores.
• Consumer focused investments behind working media increased by 5-8x.
• On track to achieve full-year ambition.
• Integration completed; cost synergies have started to flow from Q3.

INTERNATIONAL BUSINESS UPDATE

Indonesia sees strong volume growth & margin expansion continues

(*EBITDA (incl. Forex) CC: Constant Currency, USG: Underlying Sales Growth, UVG: Underlying Volume Growth) (h6)

Conclusion

Godrej Consumer Products' stock surge is backed by strong Q3FY24 operational performance, including improved margins & earnings beat. company's strategic initiatives & efficient execution of its business plan have positively influenced investor sentiment, resulting in noteworthy stock surge.