Jefferies Godrej Consumer is bullish on shares as it believes the company’s journey from good to great has begun as its new MDs look to invest in the core portfolio, which has seen double-digit volume growth in their medium term. Period will be the cornerstone of ambition. Jefferies’ buy rating on the stock comes with a target price of 1,190 per share.
After getting an inside view on GCPL over the past two months, the new MD, Sudhir Sitapati presented a balanced scorecard covering the strengths as well as weaknesses of the organization.
“In no uncertain terms, the CEO noted that driving double-digit volume growth is a medium-term aspiration, with entry gains accounting for half of it, while the remainder is coming from share gains, market growth and disruptive innovations. Medium-term Ebitda margins should go up by 150-200 bps,” the Jefferies note said.
However, two major challenges include cost inflation, tough environment in India as well as some missteps in priority sanitiser portfolios facing pressure in core due to non-investment of wipes and pick-up in competition, notes stated in.
Domestic brokerage house Motilal Oswal has also given a buy rating on Godrej Consumer stock and has retained GCPL as its top pick. its target value is 1,150. “The valuation is on average at a significant discount to its Staples peers,” the brokerage said.
Motilal believes that the management’s target of double-digit volume growth is achievable given the reduction in current complexity due to increased investments, increased marketing spend and a larger portfolio to scale up penetration. Domestic volume growth has turned healthy in FY21 and 1HFY22 after underperformance in FY16-20.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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