MOSL: GODREJ CONSUMER (Neutral)-Increased focus on new growth vectors encouraging
​Godrej Consumer: Increased focus on new growth vectors encouraging
(GCPL IN, Mkt Cap USD10.2b, CMP INR1925, TP INR1950, 1% Upside, Neutral)
- ​The huge risk appetite for acquisitions seems to have faded in recent years, and the focus now appears to be on relatively small acquisitions and improving consolidated RoCEs, which had worsened over many years.
- Management believes that gross margin needs to go up every year to be able to invest more in the core business as well as new vectors.
- GCPL is now spending 27% of A&P on new products, as against 15% four years ago, in the quest for new vectors of growth.
- New products have on average 1,500bp higher gross margin compared to the core range, and thus the impact on EBITDA margin from increased A&P has been limited.
- New growth vector in Indonesia is Hair Care, while in Africa it will be Wet Hair products.
- We maintain our Neutral rating with a target price of INR1,950. At 38.5x Mar-19E EPS, the stock appears fairly valued.
Godrej Consumer Products is a consumer goods company, manufacturing and marketing Household and Personal Care products. Co. is engaged in the manufacture and sale of soaps, cosmetics and detergents. Co.'s Personal Care products include Godrej No.1 - soaps; Cinthol - soaps, deodorants, talcs and shower gels; Godrej protekt - washes, a hand sanitiser and a personal mosquito repellent spray; and Godrej expert - creme hair colour in a sachet, powder hair colour with a unique gel technology, and herbal hair colour. Co.'s home care products include Good Knight - mosquito repellents; HIT - household insecticides; Godrej aer - home and car air fresheners; and Godrej Ezee - liquid detergents.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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