Shares of Godrej Consumer Products Limited (GCPL) fell nearly 5 per cent in Thursday’s morning trade on the National Stock Exchange. This is a day when the broader stock markets were in positive territory.
Investors in GCPL’s stock are looking very upset with the company’s updates for the September quarter (Q2 of FY23) after the market close on Tuesday. Markets remained closed on Wednesday on account of Dussehra festival.
The company has said that it will underperform on the volume and margin front in the second quarter, which is broadly in line with the trend seen in the first quarter. In the India business, GCPL expects volumes to decline mid-single digit in the second quarter, with three-year volume compound annual growth rate (CAGR) at the low single-digit. This compares to mid-single digit three-year volume CAGR in Q1. The demand environment in rural markets remained weak in the last quarter.
Furthermore, Indonesia’s business showed no signs of respite due to the weak performance in the sanitation portfolio against the backdrop of last year’s high base due to Covid. GCPL believes that there will be an initial double digit decline in currency sales. But excluding sanitation, sales growth is likely to grow by the high single digits. In Q1, Indonesia’s revenue declined 12% on a constant currency basis.
However, there are some bright spots. The GAUM (Godrej Africa, United States and Middle East) segment will maintain Q1 momentum and is likely to see low-teens constant currency sales growth.
Overall, in the second quarter, GCPL expects higher than mid-single-digit sales growth. In Q1, consolidated sales were up 8% year-over-year, with a three-year CAGR of 10%.
In addition, EBITDA is expected to decline in the mid-teens in the second quarter, given higher input cost consumption, higher marketing investments and weak performance in Indonesia during the quarter. Ebitda is earnings before interest, taxes, depreciation and amortization.
Dolat Capital Markets Pvt. Ltd. expects GCPL to report 7-8% revenue growth and a sequential decline in EBITDA margin in the second quarter. In Q1, the measure was 15.3%.
Certainly, the situation is likely to improve going forward as the fall in palm oil and crude oil prices will benefit. Further, the demand outlook is expected to improve in the second half of FY23 with easing of inflationary pressures.
Analysts at Motilal Oswal Financial Services said in a report on 5, “The focus is on driving higher margin growth with investments by the new CEO, higher returns on capital employed domestic business, medium-term earnings of the company.” The growth outlook is strong.” october.
As things stand, GCPL shares are up 29% from the 52-week low seen in March.
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