Godrej Consumer Tanks 11% After Muted Q3 Business Update; Analysts See Further Downside – News18
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Godrej Consumer Products anticipates sales growth in digit for Q3 while stating that demand conditions in the economy have been ‘subdued’ for the past few months
Godrej Consumer shares tank 11%
Shares of Godrej Consumer Products Ltd. (GCPL) dropped by up to 11% on Monday, hitting a low of Rs 1,104.20 on the BSE. The company shared a cautious Q3 business outlook, which prompted brokerages to lower their target prices.
The decline in the stock price came after GCPL indicated that it expects demand and margin challenges in the near term. The company forecasted “flattish” underlying volume growth (UVG) and mid-single-digit sales growth for Q3 FY25. Additionally, it anticipated a temporary dip in EBITDA margins for the quarter. The company also cited unfavorable weather conditions, such as delayed winters in the North and a cyclone in the South, which impacted the performance of its Home Insecticides (HI) segment, accounting for a third of its standalone business.
GCPL noted that demand conditions in the domestic market have been weak over the past few months but reassured investors that the margin pressure would be temporary. The company emphasized that its broader business remains robust, particularly in international markets, where its strategic objectives continue to be met. The company also highlighted that Godrej Africa, USA, and the Middle East (GAUM) are expected to maintain healthy EBITDA margins for the fourth consecutive quarter.
In response to the update, domestic brokerage Emkay Global downgraded GCPL to “Reduce” from “Add” and revised its target price to Rs 1,225. The firm cut earnings forecasts by 4-7%, citing demand and inflationary pressures. Emkay expects India EBITDA to decline by high teens in Q3 due to a high base and raw material challenges, with low-single-digit revenue growth and a low-double-digit decline in EBITDA.
CLSA also downgraded the stock to “Underperform,” setting a lower target price of Rs 1,000, driven by concerns over Q3 FY25 sales and EBITDA performance. The firm highlighted seasonal volatility in the Home Insecticides segment, despite new product launches, and warned that margins are likely to fall below the normal range.
On the other hand, UBS and Jefferies have maintained their “Buy” ratings, setting target prices of Rs 1,450 and Rs 1,550, respectively. JPMorgan also maintained an “Overweight” rating with a target price of Rs 1,410. Macquarie, while keeping a “Neutral” stance, lowered its target price to Rs 1,260 from Rs 1,300.
As of September 2024, promoters hold a 63% stake in Godrej Consumer Products.
