Godrej Consumer share price falls 7%: Brokerage recommends Buy rating, check target price

Godrej Consumer Product's share price tumbled around 7 per cent to Rs 836.75 and Rs 835.75 on the BSE and NSE intraday, respectively, during Thursday’s session. The weakness in the stock came mainly after the company in its quarterly update said that it is likely to report single-digit volume growth.

Godrej Consumer in exchange filing said, “We expect to deliver high single-digit sales growth in India. Our 3-year CAGR remains robust and close to double-digits. We expect a mid-single-digit volume drop, with a low single-digit 3-year volume CAGR.”

The FMCG company expects a mid-teen decline in EBITDA (earnings before interest, taxes, depreciation, and amortization) due to consumption of high-cost materials, significant upfront marketing investments to drive category development and a weak performance in Indonesia.

The Indian FMCG industry continued to remain soft during the quarter. Rural markets witnessed slower growth compared to urban. However, with moderation in inflationary pressures due to correction in commodity prices and monsoon trends largely being on track (apart for a few states), we expect consumption to improve in the second half of the year, it added.

At around 12:40 PM, the stock of the FMCG firm was trading almost 5 per cent lower to Rs 852 in an otherwise positive market, as compared to a 0.64 per cent rise in the S&P BSE Sensex.

The counter in the last six months has outperformed the market by gaining over 13 per cent versus around 2 per cent fall in Sensex, while it declined almost 11 per cent as against over 1 per cent fall in the benchmark index in 2022 so far.

Jefferies value Godrej Consumer at 43x Sep-24 earnings, lower than the multiple it ascribes to peers such as Dabur and Marico. Downside risks include a weak macro environment in Indonesia, sharp increase in input costs of the company, it said, adding that the cross-currency volatility could also impact reported growth. It retains a Buy rating with a target of Rs 1040 (24% upside).