Godrej Consumer Products share price opened 10 percent higher on May 12, a day after the FMCG major reported a 59.13 percent increase in consolidated net profit at Rs 365.84 crore for the fourth quarter. The company had posted a net profit of Rs 229.90 crore in the year0ago period, GCPL said in a BSE filing.
The company’s net sales during the January-March 2021 quarter were up by 26.87 percent to Rs 2,705.69 crore against Rs 2,132.69 crore in the year-ago period.
The company’s total expenses were at Rs 2,259.12 crore, up 26.07 percent from Rs 1,791.93 crore a year ago. The firm’s revenue was up 34.63 percent to Rs 1,499.74 crore from Rs 1,113.94 crore in the year-ago quarter.
The stock was trading at Rs 787.50, up Rs 71.55, or 9.99 percent, at 0934 hours. It touched an intraday high of Rs 787.50 and an intraday low of Rs 750.15. There were pending buy orders of 48,597 shares, with no sellers available.
The topline was in line with weak margin delivery on an inflationary setting, the research firm said. The company paid a dividend and channelled cash flow to repay debt. It appointed Sudhir Sitapati as MD and CEO, which strengthens the leadership.
Sitapati’s appointment is a major medium-term positive and the company is in an important phase of expansion into new categories and would gain immensely from a strong CEO. The FMCG firm is set to become a broad-based home and personal care company over the next four to five years.
Jefferies is of the view that the appointment of new CEO can be a trigger for re-rating. The company continues to be the top pick in the FMCG space.
After more than a decade of being neutral on the company, we are upgrading the stock to buy. It is admittedly an early call, but if its businesses start to perform and there is further rationality in capital allocation, there could be significant gains for investors, with a significant re-rating as well. We upgrade the stock to buy with a target of Rs 870 (40x FY23E EPS instead of 35x earlier).
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